A woman walks past the Baidu booth at the China International Technology Fair in Shanghai.

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GUANGZHOU, China – Chinese search engine giant Baidu is in talks to raise funds for a stand-alone artificial intelligence semiconductor company, a person with knowledge of the matter told CNBC.

The move symbolizes continued pressure from China’s largest tech companies to improve their skills in the chip sector. For Baidu, this means another effort to diversify its business well beyond advertising.

Nasidq-traded shares of Baidu rose 7.4% as U.S. markets opened on Wednesday. They rose 6.67% on Tuesday.

Baidu’s chipmaker would be a subsidiary, with the search giant likely to be the majority shareholder, the person said. Venture capital firms GGV and IDG Capital are involved in early discussions to invest in Baidu’s chipmaker, the source added. Both companies have extensive investments in China.

Baidu declined to comment when contacted by CNBC. IDG Capital was not immediately available for comment. Calls to GGV’s offices in Singapore, Shanghai and Beijing went unanswered.

Currently, Baidu has its own chip unit, which has helped develop its Kunlun semiconductors, which are designed to process large amounts of data for artificial intelligence applications. According to the source, a standalone chipmaker is set to help Baidu better commercialize its technology.

The semiconductor business would aim to sell chips to customers in a variety of industries, including automakers, currently facing a global chip shortage.

An independent chip manufacturer could also integrate itself into other business areas of Baidu, for example into driverless car software.

Surge of diversification