Kuaishou Technology (01024.HK) is planning to spin off its Kling AI video-generation model business and raise $2 billion, giving the unit a valuation of about $20 billion, people familiar with the matter have told LatePost. The deal would value the unit at almost 70% of the parent company’s current market capitalisation.
The proposed fundraising comes as Chinese technology groups race to commercialize generative artificial intelligence tools for video production, one of the fastest growing and most competitive areas of AI development.
Kuaishou confirmed that it is assessing a proposal to restructure Kling’s assets and businesses, which may involve the introduction of external financing. In a filing with the Hong Kong stock exchange on May 12 in response to media speculation, the company said the proposal is still at a preliminary stage and it has not entered into any definitive agreement.
People with knowledge of the talks said Kling’s annual recurring revenue (ARR) has reached $500 million, more than doubling since before February’s Lunar New Year holiday. The company is in discussions with investors including Tencent (0700.HK) although the transaction has not yet closed.
If completed, the deal would make Kling the world’s most highly valued standalone video-generation AI product. U.S. rival Runway, one of the leading companies in the sector, is valued at about $5.3 billion.
Kuaishou has also introduced a new incentive structure for the Kling team, according to one person familiar with the arrangements. The incentives increase significantly if the business eventually reaches an initial public offering valuation of $40 billion.
Racing to defend an early lead
Kuaishou’s aggressive push reflects both the rapid rise of AI video generation and the growing pressure from larger rivals such as ByteDance and Alibaba (9988.HK).
At the start of 2025, Kuaishou had set Kling a revenue target of $60 million for the year. By the end of December, revenue had already reached $150 million, while the current ARR of $500 million has exceeded even the company’s most optimistic expectations.
By comparison, MiniMax (0100.HK) generated about $53.1 million in AI-related revenue in 2025, including contributions from its Hailuo AI video-generation product.
Chinese internet companies have poured resources into generative AI following the explosive popularity of large language models. But many executives inside the industry view ByteDance’s release of Seedance 2.0 earlier this year as a defining moment for AI video production.
Videos generated by the system — including highly realistic mock fight scenes featuring Hollywood actors Tom Cruise and Brad Pitt — spread rapidly across global social media platforms, accelerating adoption among video creators and short drama producers.
Computing power and talent become decisive
Kuaishou’s long-term investment in Kling helped position the company to benefit from the video-generation boom, but it has also exposed the group to fierce competition from larger rivals with deeper financial resources.
Kuaishou reported total revenue of 142.8 billion yuan ($21 billion) and adjusted net profit of 20.6 billion yuan in 2025. By comparison, both ByteDance and Alibaba generated annual revenues exceeding 1 trillion yuan during the same period. Bloomberg has reported that ByteDance’s net profit surpassed 350 billion yuan that year.
Computing power has become one of the most critical battlegrounds in the AI race. Following the launch of Seedance 2.0, ByteDance reportedly struggled to meet demand despite heavy investment in AI infrastructure, with waiting queues at peak periods reaching 90,000 users and delays stretching to 10 hours.
According to the South China Morning Post, ByteDance plans to increase capital expenditure by about 25% in 2026 to 200 billion yuan, with a significant share earmarked for AI computing infrastructure.
Competition for engineers has become equally intense. ByteDance has introduced separate equity incentives for its Seed AI team, while DeepSeek’s efforts to raise outside funding have partly been driven by the need to price employee stock options competitively against compensation packages that can exceed tens of millions of yuan annually.
Kling’s success has made its core research team a prime target for recruiters and rival technology groups searching for AI video-generation talent.
From professional creators to mass consumers
Kuaishou was among the earliest Chinese internet platforms to commit heavily to video-generation AI. The company launched its AI strategy in early 2023, shortly after the release of GPT-4, when chief executive Cheng Yixiao told employees to focus on recommendation algorithms and video generation.
Unlike some rivals chasing mass-market adoption from the outset, Kling initially focused on professional users such as short-video creators, advertisers and enterprise customers. According to public disclosures, nearly 70% of Kling’s revenue comes from subscriptions by professional users.
Gai Kun, senior vice-president at Kuaishou and head of Kling AI, told employees late last year that consumer-facing AI content platforms offered greater long-term potential but required far larger investments and more mature technology. Until the market reached a tipping point, he said, Kling should prioritise becoming the best production tool available.
That tipping point may now be arriving. Late last year Kling released version 2.6, featuring synchronised audio and video generation as well as improved motion-control functions. AI-generated “dancing pet” videos spread virally from South Korea to international social media platforms, helping Kling reach a broader consumer audience.
In early 2026, Kling ranked first in Apple’s iOS graphics and design download charts in nearly 40 countries and regions including Brazil, Russia and Singapore. It also became the highest-grossing graphics and design app on iPhones in South Korea and Russia.
AI-generated films gain traction
The technology has already drawn criticism from parts of the entertainment industry. The Screen Actors Guild‐American Federation of Television and Radio Artists and the Motion Picture Association publicly warned that such systems could threaten the rights and livelihoods of actors and traditional film producers.
The global market for AI-generated video is expected to expand rapidly. Research group Grand View Research estimates that the sector will grow from about $4.55 billion in 2025 to $42 billion by 2030, a compound annual growth rate of 32.2%.
For Kuaishou, spinning off Kling could provide a clearer standalone valuation and easier access to external funding to support further investment in research and marketing. But it would also intensify a familiar rivalry: once again, after building an early lead in a fast-growing corner of the internet economy, Kuaishou is preparing to compete head-on with ByteDance.
Sources:
LatePost
With additional reporting by theinsight.asia
