Baidu Inc. is positioned to be the best proxy to own as artificial intelligence tools help China shift $7.4 trillion spending from offline to the internet, Morgan Stanley said.

Analysts led by Gary Yu said Baidu is “the most obvious beneficiary” of increasing AI adoption in China. They upgraded the search-engine operator to overweight from equal-weight, citing the firm’s extensive know-how in areas like autonomous driving and generative AI models, as well as its proprietary search data.

Baidu shares gained 1.3% in US premarket trading, outperforming the exchange-traded KraneShares CSI China Internet Fund, which fell 2.9%. The stock was left out of Wall Street’s chase of all things AI, lagging the tech-heavy Nasdaq 100 Index this year as concerns over China’s economic rebound mount.

“The market has yet to give credit to Chinese internet platforms for AI innovations – even with the launch of ChatGPT-like products,” the analysts said in a note Monday.

Demand for Baidu’s Ernie bot — the firm’s answer to ChatGPT — has been robust, with over 200,000 already signing up for the tool, Yu said. He expects Baidu to be within the first group of companies receiving licenses to commercialize AI-generated content. Chinese regulators plan to require a security review of generative AI services before allowing them to operate, according to draft rules posted in April.

Investors have been concerned whether Chinese tech companies can garner enough chips to train their AI models, due to a US-led effort to restrict China’s access to semiconductor technology. That won’t be an issue for Baidu, as the company built up its chip inventory before export curbs kicked in, Morgan Stanley said.