In a historic move within the artificial intelligence arena, China's three internet behemoths—Tencent, Alibaba, and Baidu (collectively known as BAT)—have come together on the same investment stage.

On the evening of July 2nd, an official announcement from Kuaishou Technology brought a remarkable investment saga to a climax. The company's video generation large language model entity, Beijing Kling (hereafter referred to as Kling), completed its first external funding round, raising up to $3 billion at a pre-money valuation of $15 billion, resulting in a post-money valuation of approximately $18 billion.

The rare collective participation of BAT, alongside state-backed industrial funds, top-tier private equity firms, and Middle Eastern sovereign capital, sets a new record for the largest single funding round for a global video large model company. This marks the first time the three giants have joined forces on the same investment deal since the conclusion of China's internet "Warring States" era.

The video generation sector is no stranger to dramatic turns. In March 2026, OpenAI announced the shutdown of Sora, the model that once ignited global AI fervor with its "Tokyo street woman" video. Around the same time, Kuaishou reported that Kling's annualized revenue run rate (ARR) for January 2026 exceeded $300 million.

Four months later, with the $3 billion funding secured, Kling has completed a stunning transformation from an "internal AI project at Kuaishou" to an "independent AI company valued at over 100 billion yuan." However, behind the $18 billion valuation lies a complex entity: it generated annual revenue of 1.1 billion yuan but incurred an annual net loss of 1.9 billion yuan, with negative net assets. Nevertheless, capital's calculus extends beyond the present, betting on the future of a trillion-yuan AI video market and whether Kuaishou—once a trillion-yuan market cap company—can cultivate a new ace to support its next decade.

Rare BAT Collaboration Grants Kling Its "Entry Ticket" for Independence

Kling's funding process was remarkably efficient.

Initial market rumors in early May suggested Kuaishou planned to spin off Kling AI, seeking $2 billion at a $20 billion valuation. On May 12th, Kuaishou confirmed its board was evaluating a restructuring plan. By July 2nd, the full package was finalized.

The financing transaction adopted a "phased fundraising with dynamic expansion" model. In the initial phase, 21 independent investors, along with Party A and Party B, subscribed to a capital increase in Beijing Kling for a total of 13.8236 billion yuan. On the signing day, 15 additional investors joined via supplemental agreements, contributing an extra 5.2235 billion yuan.

Notably, the deal included a 60-day fundraising window, with the total capital increase capped at 20.4471 billion yuan (approximately $3 billion), representing 16.67% of Beijing Kling's expanded registered capital. With the full $3 billion secured, Kling's post-money valuation reached about $18 billion, a slight downward adjustment from the initial rumored target of $20 billion.

Kling's investor lineup is industry-leading. Lead investors include CPE, Guofang Chuangtou, BlueFive Capital, Tencent, Zhongguancun Science City Fund (in conjunction with Guoke Investment), and CITIC Securities. On the industrial capital side, Tencent participated through its entities Shanghai Qishan Investment and Parallel Mars, while Alibaba Cloud and Baidu also joined the round. This first-ever "joint appearance" of BAT on the AI video track is highly significant.

State-backed and industrial funds were also heavily represented, with key regional sci-tech innovation funds such as Shanghai Guofang, Beijing Guoke Shengcheng, Shenzhen Hongtu, Beijing Artificial Intelligence Industry Fund, and Chongqing Manufacturing Transformation Fund participating. Top-tier market-oriented PE firms like CPE, CITIC Jinshi, ICBC Capital, Hony Capital, and Qiming Venture Partners also entered the fray.

Furthermore, Abu Dhabi-based BlueFive Capital appeared on the investor list, alongside leading entertainment industry players like Huace Film & TV and Mango Industrial Investor (Houwei Capital).

The announcement also disclosed Kling's core financial data. Commercially, Kling's revenue for the full year 2025 was approximately 1.1 billion yuan, with single-month revenue exceeding $200 million in December 2025. By March 2026, its ARR had surged to $500 million. However, this rapid growth was accompanied by widening losses: net losses expanded from 500 million yuan in 2024 to 1.9 billion yuan in 2025.

The Rationale Behind Kling's Multi-Billion Dollar Valuation

The post-money valuation of $18 billion, equivalent to about 122.1 billion yuan, represents roughly 76% of Kuaishou's current total market capitalization (approximately HK$184.3 billion or 159.4 billion yuan as of the July 3rd Hong Kong market close). The valuation gap between Kling and Kuaishou reflects a clash of two entirely different business logics.

Kuaishou's core business is its short-video content community and social platform, where multiple segments are facing a reality of slowing growth. Data shows that the growth rate of Kuaishou's e-commerce GMV has declined year-over-year from 78% in 2021 to 15% in 2025, with monthly active user growth also showing signs of deceleration. In contrast, the AI video generation sector enjoys a higher growth premium. These two distinct valuation systems make spinning off Kling for independent funding and listing the most direct path to unlocking the value of this asset.

The $18 billion valuation is underpinned by Kling's established commercial foundation and its strategic position in the sector. Since the release of its 1.0 version in June 2024, Kling AI has undergone over 30 major version updates. The latest Kling AI 3.0 series model, launched in February 2026, achieved breakthroughs in consistency and realistic output, extended video length to 15 seconds, and natively supports multi-language, multi-dialect, and multi-accent audio generation. In terms of user data, Kling's global user base has surpassed 100 million.

However, the pace of commercialization struggles to keep up with the "cash-burning" speed of R&D investment.

Announcement data shows Kling's 2025 loss of 1.9 billion yuan was nearly four times its 2024 loss of 500 million yuan. Kling is in a critical phase of "trading capital for time, and time for barriers."

Nevertheless, from Kuaishou Group's strategic perspective, spinning off Kling holds significance far beyond "raising a sum of money." Regarding Kling's financing and potential listing, analysts have noted that such a move can help insulate the high-growth AI asset from being undervalued by the lower valuation of the core business, while also securing funding at a relatively high valuation. For Kuaishou, the intensive R&D and computing power investments Kling AI makes in the video generation track can be monetized through its equity value, allowing the parent company to further focus on its main operations.

The Capital "Bet": A 5-Year IPO Mandate Forces Kling's Commercialization into High Gear

The finalization of Kling's $3 billion funding signifies that competition in the video generation arena has fully escalated from a "battle of technical demos" to a "contest of capital and commercialization."

The domestic video large model market has initially formed a "top three" landscape: ByteDance's Seedance, Alibaba's HappyHorse, and Kling. In February 2026, ByteDance released Seedance 2.0, hailed by industry figures as the current "strongest video generation model on the planet." In April, Alibaba's HappyHorse emerged. These three companies occupy the top three spots on the Artificial Analysis text-to-video leaderboard. Kling's first-mover advantage is being diluted, facing competition from ByteDance and Alibaba ahead and new domestic and international players from behind.

Industry experts suggest that Kling's valuation is very high, as the market remains in the tail end of the AI investment boom. This timing could be optimal for Kling's listing, with the potential for its valuation to eventually far exceed that of Kuaishou.

Looking at the broader market, Kling's spin-off and listing open a new realm of possibilities for the industry: AI video generation platforms can operate independently, pursue capitalization, and focus on commercialization. Kuaishou has made a non-competition commitment, pledging not to directly or indirectly control any entity primarily engaged in the video generation model business for five years following the restructuring's completion. This means Kling will face the global video large model "meat grinder" as a fully independent market entity.

Analysts point out that while market imagination exists, genuine performance support may take several more years. Currently, almost all AI large models or generative AI products are unprofitable, but demand and the market are gradually being cultivated. Competition in China's video generation field remains fierce, and the industry landscape is unlikely to change immediately due to one leading company's listing. However, Kling's listing will provide a valuable reference valuation for other companies in the video generation AI space, offering upward potential for other listed firms.

The announcement included a key exit safeguard clause: if Beijing Kling fails to complete an initial public offering (IPO) by October 30, 2031, or cannot complete all restructuring-related regulatory procedures within nine months, investors have the right to require the company to repurchase their equity at an 8% annual simple interest rate.

This five-year IPO commitment with an 8% buyback guarantee is a typical configuration for a "star project with a safety net." From the launch of Kling 1.0 in June 2024 to the finalization of its $3 billion funding in July 2026, Kling's challenges are just beginning as it faces the triple pressures of cost, valuation inversion, and market competition.

With capital's "bullets" now loaded, Kling must accelerate its commercialization process within a limited timeframe, find a differentiated path distinct from its competitors, and convert investor resources into tangible technological and cost barriers. The battle in the domestic video generation race has only just begun.