The most striking element of Kuaishou's spin-off of Kling isn't the financing amount itself, but rather the eye-catching contrast in valuations.

According to LatePost, Kuaishou is planning to spin off its video generation model business, Kling AI, with a target of raising $2 billion in financing at a valuation of $20 billion, though the deal remains pending. As of the reported close of the Hong Kong stock market, Kuaishou's total market capitalization stood at just shy of $29 billion.

In essence, an AI video business born within Kuaishou is seeking a valuation that approaches 70% of its parent company's market cap.

This development isn't just another routine financing update; it signals that Kuaishou's most innovative asset is being re-evaluated by capital markets as a standalone entity.

Kuaishou's core business is by no means weak. By 2025, its total revenue reached RMB 142.8 billion, with adjusted net profit hitting RMB 20.6 billion. Among Chinese internet companies, this represents a solid foundation for profitability. However, the issue lies in the fact that capital markets still perceive Kuaishou through the lens of mature sectors such as short videos, livestreaming, e-commerce, and advertising.

While these businesses generate revenue, their growth stories lack the allure needed to captivate investors. The market treats Kuaishou as a mature internet platform, rather than a pioneering force at the forefront of a technological revolution.

Kling, on the other hand, is a different story.

Positioned in the burgeoning field of AI video generation, Kling offers global potential, creator tool attributes, and tangible revenue support. According to reports, Kling's annual recurring revenue (ARR) has surged to $500 million, doubling since before the Lunar New Year. This figure demonstrates that Kling is not merely a trendy AI novelty without a clear path to monetization, but a product with proven revenue-generating capabilities.

The real crux of this development isn't whether Kling deserves a $20 billion valuation; rather, it's that Kuaishou finally possesses an asset capable of breaking free from its existing valuation framework.

In recent years, Kuaishou's challenge hasn't been a lack of businesses or profits, but rather the difficulty of persuading markets to embrace new narratives. The short video wars have concluded, and the growth potential of livestreaming e-commerce has already been factored into its valuation. To investors, Kuaishou appears more as a cash-flow-generating platform than a company poised to redefine industries.

Kling fills this narrative void.

For the first time, Kuaishou has an opportunity to transcend its identity as a mere "short video platform" and emerge as a formidable contender in the AI video infrastructure space.

But why spin off Kling? The rationale extends beyond mere financial considerations.

AI video generation is a capital-intensive endeavor, requiring substantial investment in computing power, models, data, and global market expansion. More critically, Kuaishou needs to provide Kling with a new organizational structure and incentive system to foster innovation and attract top talent.

The competitors in this space are far from ordinary startups. Domestically, there are giants like ByteDance and Alibaba; overseas, the likes of Runway, OpenAI, and Google loom large. ByteDance, in particular, wields significant advantages with Seedance, superior computing reserves, product capabilities, and global traffic. If Kuaishou keeps Kling within the group, competing under outdated budget and compensation systems will make it challenging to retain top talent in the long run.

In the AI race, the final battle hinges on computing power and talent, not just catchy slogans.

Once Kling achieves success, its core R&D personnel will become prime targets for big tech companies and headhunters. At that point, Kuaishou cannot rely solely on salaries or vague promises of "group strategic priority." Independent valuation, dedicated option pools, and future IPO incentives offer more pragmatic solutions.

Thus, Kling's spin-off essentially represents Kuaishou's strategic reconfiguration for the AI war: leveraging financing to bolster computing power, using valuations to stabilize teams, and adopting an independent identity to enhance market imagination.

This is also a necessary strategic choice for Kuaishou. AI video isn't a minor upgrade but a technological cycle that could redefine content production.

While short videos solved the distribution problem—helping ordinary creators reach wider audiences—AI videos address the production challenge. Ordinary users may lack skills in shooting, editing, modeling, or post-production, but AI enables direct video generation. This is Kling's greatest opportunity.

Kling isn't merely building a "fun AI video tool." Its true target is production scenarios such as advertising, short dramas, short videos, brand marketing, and enterprise content. For these users, AI video isn't a toy but a production asset. As long as it reduces costs and improves efficiency, users are willing to pay.

This explains why Kling initially focused on professional creators and enterprise clients rather than chasing mass entertainment markets. This strategy is sound because, in the early stages of AI adoption, the most valuable users aren't early adopters but those who can monetize the technology.

However, risks are evident.

At $500 million ARR, a $20 billion valuation implies a 40x ARR multiple—a high growth expectation priced in by capital markets. Kling must now prove that its growth is sustainable and deeply embedded in content production workflows, rather than being driven by fleeting hype.

A more pressing issue is cost. Unlike traditional software, where marginal costs per user are low, AI video generation incurs significant computing expenses for heavy users. Longer videos, higher resolutions, and complex audio-visual synchronization drive costs upward.

Kling must demonstrate not just rapid revenue growth but also eventual profitability.

Another risk is competition. The video generation space evolves rapidly; today's leader may be overtaken tomorrow. ByteDance's Seedance 2.0 rollout demonstrates that when big tech aligns models, computing power, traffic, and products, their explosive potential is formidable. As a standalone tool, Kling's competitive moat is fragile.

Its true mission is to integrate seamlessly into creators' full workflows: scripting, storyboarding, character consistency, camera control, dubbing, editing, ad material generation, and data feedback. Only by embedding itself in production processes can it transcend being a viral tool and become AI-era infrastructure.

My assessment: Kling may represent Kuaishou's second major alignment with a technological era, following short videos.

The first time, Kuaishou captured ordinary users' expressive urges in the mobile internet era.

The second time, Kling may harness ordinary users' productivity in the AI era.

This competition, however, is tougher than the short video wars. Short videos competed on content, community, recommendation algorithms, and traffic; AI videos compete on computing power, models, talent, globalization, and monetization efficiency. Kuaishou is no longer just vying with Douyin for users—it is competing with the world's most resource-rich tech firms for the next content production gateway.

If Kling's financing materializes, it will undoubtedly benefit Kuaishou. But this isn't the finish line; it's merely Kuaishou's re-entry into the game.

Whether Kling can justify a $20 billion valuation, or even a future $40 billion IPO narrative, depends not on creating a few viral AI videos but on evolving from a tool into content industry infrastructure.

If it succeeds, Kling will be Kuaishou's second ticket to the future.

If not, it will remain a brilliant but costly valuation reassessment amid the AI hype.