Kuaishou seeks $2.8 billion for Kling AI ahead of spin-off

This massive capital injection establishes Kling AI as a primary commercial challenger in the generative video market, separating its heavy infrastructure costs from Kuaishou’s short-video margins. By securing investment from rivals like Alibaba and Tencent, Kuaishou is effectively spreading the financial risk of high-intensity model training across the Chinese tech ecosystem. The move signals a shift from research-based AI demos to enterprise-scale production tools that require sustained, multi-billion-dollar computing budgets. Watch for the official Hong Kong IPO application, which is expected within a 12-month window to provide a permanent funding vehicle for the unit.

The Kling AI financing underscores a period of significant volatility in the global generative video sector. Per VentureBeat in June 2026, the competitive landscape has contracted sharply following the discontinuation of OpenAI’s Sora due to financial instability and the suspension of ByteDance’s international Seedance 2.0 rollout amid copyright concerns. This has left an opening for Chinese platforms to target global markets; according to South China Morning Post reporting from July 2026, roughly 75% of Kling AI’s revenue now originates from outside China, emphasizing its strategy to capture international creator budgets.

Technically, Kling has focused on vertical integration to maintain its lead. In December 2025, the unit launched Video O1, which Kuaishou described as a unified multimodal model capable of handling generation and post-production tasks—such as camera extensions and multi-subject consistency—within a single workflow. This architecture aims to reduce the friction of switching between disparate tools, a key pain point for professional studios.

Simultaneously, the broader Chinese AI market is engaged in a defensive price war. Per Reuters in July 2026, Alibaba Cloud recently introduced a 40% launch discount for its HappyHorse 1.1 model to undercut rivals. While Kling AI is currently scaling its revenue run rate—reaching over 650 million yuan in Q1 2026 according to company disclosures—the high costs of localized data centers and Nvidia H200 silicon, amid ongoing trade restrictions, remain the primary long-term hurdle for the unit's path to profitability.