The undervaluation of Chinese internet stocks is a widespread issue, akin to the overvaluation observed in AI stocks.

Among these, Pinduoduo and Kuaishou are the most notable examples, with Kuaishou facing even greater challenges than Pinduoduo.

Based on Kling's current valuation of $18 billion, the intrinsic value of Kuaishou's main platform is estimated at just $10 billion. There's little need to delve into metrics like cash flow, given that Kuaishou's adjusted net profit reached RMB 20 billion last year.

However, Tencent's recent announcement to sell its Kuaishou shares has once again demonstrated that all undervaluations have underlying reasons.

On the closing day of July 7th, Kuaishou's stock price plummeted by 12%, dropping below the discounted range of HK$43.15 to HK$44.53 per share in Tencent's off-market block trades.

For Tencent, there may not be a more opportune time to sell Kuaishou shares, especially as Kling has outlined a promising future for the company.

Institutional investors acquiring these shares will undoubtedly consider the impact of Tencent's sale. Tencent still retains a significant stake, indicating that the market's reaction may exceed their perceived safety margin.

Nevertheless, Tencent's off-market block sale is ultimately a financial asset reallocation. Even if it causes a significant market impact, it won't bring any substantial disaster to Kuaishou's core business.

When Tencent exited JD.com and Meituan, the market should have anticipated a similar move with Kuaishou. Moreover, despite selling stakes in JD.com and Meituan, Tencent's business collaborations with both companies remained unaffected.

What truly warrants vigilance is WeChat Video Account's relentless advance in the competitive landscape. This former peer of Kuaishou is now reenacting Douyin's past threat to Kuaishou.

Tencent's Strategic Considerations for Entry and Exit

To understand Tencent's current cash-out, it's essential to revisit the fierce battle for short video traffic.

A few years ago, as Douyin emerged as an unstoppable force devouring netizens' time, strategic anxiety permeated Tencent.

Tencent launched over a dozen short video products, with Weishi shouldering high hopes and receiving massive resource injections. The outcome is well-known. These defensive lines, nurtured by internal traffic, crumbled under Douyin's fiercely aggressive algorithmic assaults.

At that critical juncture, Tencent surveyed its surroundings and found only one viable option left on the market.

Besides ByteDance itself, Kuaishou emerged as the industry's sole entity with sufficient scale to potentially counterbalance Douyin's traffic siphoning. Tencent's substantial investments in Kuaishou were never solely for financial returns but aimed to establish a buffer zone beyond Tencent's traffic moat.

Regrettably, Kuaishou failed to meet Tencent's expectations by firmly holding its ground against ByteDance.

Reviewing the battle reports from past years, whether in terms of daily active users, rising daily usage duration, or territorial gains in e-commerce closed loops and local life services, Douyin has demonstrated dominance. Kuaishou's growth curves for various metrics have consistently appeared overly sluggish.

According to QuestMobile, by January 2026, ByteDance's app user time share had surged to 37.4%, historically surpassing Tencent's 30.0%.

ByteDance hasn't just won the short video battle; it has also dethroned the former traffic hegemon in the competition for total national time.

While Kuaishou couldn't halt ByteDance's advance, a turning point emerged within Tencent.

WeChat Video Account established its position and showcased remarkably robust growth momentum. With its "biological son" now capable of standing alone, the priority shifted to concentrating all resources on enhancing Video Account's scale and stickiness. Consequently, the necessity of Kuaishou, the former mercenary, naturally diminished.

The more successful Video Account becomes, the more certain Tencent's sale of Kuaishou becomes. The only considerations left are the timing and method of the sale.

In contrast to Tencent's previous divestments of JD.com and Meituan shares, which utilized in-kind dividend distributions (directly distributing stocks to Tencent shareholders and leaving the buying and selling decisions to the market), Tencent unusually opted for off-market block trades for Kuaishou, cashing out over $1.5 billion.

The differing operational tactics conceal a sophisticated financial strategy.

In-kind dividend distributions are operationally simple but fail to maximize asset value, given retail investors' poor long-term stability in holding stocks.

JD.com and Meituan had more solid fundamentals back then. However, Kuaishou's current main platform revenue growth has slowed to single digits, with its stock price lingering in the doldrums. Adopting a distribution model could easily exacerbate fragile market sentiment.

On the same day as the Kuaishou divestment, Tencent released the Hunyuan 3 large model. The AI-era computational arms race resembles a bottomless pit. Rather than retaining an old asset with limited appreciation potential, Tencent chose to directly cash out and acquire chips for the next era.

Kling's Spin-off: Kuaishou's Valuation Self-Rescue

As major shareholders meticulously plan their exit, Kuaishou's management is also conducting a life-or-death internal strategy review.

Losing Tencent as a major shareholder is merely a notional separation. Facing growth bottlenecks in its core business, Kuaishou urgently needs to propel Kling towards independent financing, carving out an imaginative new path.

Kling's $18 billion independent financing isn't merely to tell a captivating story to the capital market; it conceals Kuaishou's highly pragmatic asset unpackaging and valuation restructuring.

We must confront Kuaishou's current financial structure head-on.

With the short video traffic pool reaching its peak and facing fierce competition, Kuaishou's main platform business confronts an obvious physical ceiling.

In stark contrast, Kling AI has surged ahead in technology and commercialization.

By March this year, Kling's ARR (Annual Recurring Revenue) had approached $500 million, establishing itself as an absolute leader in the global multimodal large model field.

This raises an internal contradiction:

Large model R&D requires annual capital and R&D expenditures reaching tens of billions of RMB. If Kling remains within Kuaishou, this money-devouring beast's computational investments would instantly tear apart Kuaishou's already tight profit margins.

This might also explain why the capital market previously hesitated to assign a positive valuation to Kuaishou.

Spinning off Kling for independent financing aligns with Kuaishou's best interests and favors Kling's long-term development.

By spinning off this high-potential, high-consumption AI business, Kuaishou achieves excellent risk isolation.

On one hand, Kling can entirely shed the constraints of its parent company's profit margins, embracing the primary market as an independent AI company. By attracting capital from giants like BAT and national-level industrial funds, it can fuel technological advancements with market-wide funds while elevating its industry position as infrastructure.

On the other hand, after shedding the enormous cost burden of AI R&D, Kuaishou's main platform can preserve its profits and cash flow.

A short video platform with a stable foundation and clear profit expectations will see its P/E ratio more likely return to a reasonable range. This valuation gap resulting from business spin-offs provides a clear logical basis for the capital market's revaluation.

From Ally to Adversary

The capital-level spin-off and restructuring are undoubtedly ingenious, but they remain mere notional defenses.

After spinning off Kling, the money-devouring beast, Kuaishou's main platform still faces the most core and fatal question: Who has sealed Kuaishou's business ceiling?

The answer used to be Douyin, but now it increasingly includes Video Account.

From Tencent's top-level strategic perspective, if Video Account merely replaces Kuaishou's role, then in the gritty real commercial battleground, Video Account poses tangible business competition and traffic displacement threats to Kuaishou.

Douyin's early stronghold lay in first- and second-tier cities and among young trendsetters. Kuaishou could initially compete due to its absolute penetration in third- and fourth-tier cities and vast rural markets. The community barriers built by the "Laotie Economy" (a term referring to the strong community ties and loyalty among Kuaishou's user base) once thwarted numerous imitators.

However, Video Account doesn't adhere to the above territorial division logic.

One need only observe ordinary families' smartphone screens to reach a conclusion.

Many elders and middle-aged and elderly groups, often bewildered by complex APPs, may never actively download Douyin or Kuaishou from app stores. WeChat's deeply penetrated social reach naturally fills this void.

Through sharing in family groups and Moments, Video Account forcefully pushes short video content to this vast demographic of silver-haired users and lower-tier market users without shedding a drop of blood.

Video Account and Kuaishou now fatalistically overlap in user demographics, or more specifically, Video Account ruthlessly overlays Kuaishou.

Over the past few years, Douyin has maintained rapid expansion in traditional advertising monetization, as well as in e-commerce and local life services.

Beyond its main platform, with its strong traffic-driving capabilities, emerging APPs like Tomato, Hongguo, and Qishui have dealt powerful blows to traditional predecessors like China Literature, iQiyi, Tencent Music, and NetEase Cloud Music.

This thoroughly proves that short video content platforms are today's best internet business carriers, without equal.

From this perspective, even WeChat's core instant messaging function takes a backseat.

While instant messaging software boasts strong user stickiness, even in the AI era, it's hard to envision any real threat to WeChat. However, as a business carrier, WeChat still falls short of pure short video platforms.

There's no other reason: they're time furnaces, with native single-column vertical scrolling—perfect for feasting on the internet pie.

Both Kuaishou and Douyin boast high per-capita usage durations. Although Video Account hasn't disclosed specific user duration data, industry consensus is that its figures have been steadily and rapidly growing.

The current traffic battleground is extremely crowded.

Not just dedicated short video platforms like Douyin and Kuaishou, but content communities like Bilibili and Xiaohongshu, and even Pinduoduo, Alipay, and Meituan, have placed short videos at their primary entrances.

However, users' attention is finite, as is the number of content platforms they can accommodate.

Against this backdrop, Video Account's growth of this magnitude inevitably causes the most direct crowding-out effect on Kuaishou's main platform traffic.

Tencent's capital market exit is merely a preordained declaration. Video Account's relentless advance into Kuaishou's business heartland may be the reality Kuaishou needs to confront more urgently.