Kling AI raises $2B as Kuaishou spins off video unit at $15B valuation

Kuaishou's AI video unit Kling raised $2 billion from Alibaba, Tencent and Baidu at a $15 billion valuation, positioning it to dominate the AI-generated video market after OpenAI shut down Sora. The funding round, which could expand to roughly $3 billion with additional investors, values the business at about $18 billion on a post-money basis, according to a person familiar with the matter.

"The pre-transaction valuation of $15 billion is commercially reasonable and falls within the valuation range implied by selected comparable companies and comparable transactions," Kuaishou management said in a filing. The company will retain a 68.3% stake in Beijing Kling, the entity that holds the AI video assets, and will continue to consolidate its financial results.

The round included 21 independent investors spanning China's largest technology companies and state-owned banks. Alibaba, Tencent and Baidu participated alongside ICBC, China Construction Bank, the China Internet Investment Fund, HTSC and Citic Securities. Atypical Holdings, an entity tied to Kuaishou independent non-executive director Lu Rong, and Shanghai Qishan Investment, a Tencent affiliate, also joined. Kuaishou shares rose 6.2% to HK$45.30 in Hong Kong trading on Friday.

Kling generates videos and short films from text prompts, a category OpenAI abandoned in March when it shut down Sora after the tool failed to retain users while burning through roughly $1 million per day in compute costs, according to Bloomberg. Kling's annual recurring revenue reached $500 million in March, up from $300 million in January, driven by the launch of its third-generation model. First-quarter revenue topped 650 million yuan ($96 million), more than triple the year-earlier figure.

The Sora Void and Competitive Landscape

Sora's collapse left a gap in the professional AI video market that Kling is racing to fill. The tool competes directly with ByteDance's Seedance and the startup Shengshu for customers including filmmakers, advertisers and creative studios. Unlike Sora, which struggled with user retention and prohibitive compute costs, Kling has demonstrated a path to monetization through subscription revenue from professional users.

The $2 billion raise is part of a broader wave of Chinese AI companies pulling in large funding rounds as Beijing pushes to keep its champions domestically funded. Kuaishou has targeted an initial public offering for Kling in 2027, according to The Information, though the timeline could shift depending on market conditions and the unit's ability to sustain its growth trajectory.

Investor Implications

For Alibaba, Tencent and Baidu, the investment provides exposure to one of the few AI video platforms with proven revenue — Kling's ARR more than doubled in the first quarter alone. The deal also deepens ties between China's tech giants and Kuaishou, which operates the country's second-largest short-video platform behind ByteDance's Douyin. Kuaishou's retained 68.3% stake means the parent company will capture most of the upside if Kling's valuation grows toward the $18 billion to $20 billion range discussed in earlier negotiations, while the investor consortium gains a foothold in a market that could reshape content production. The key risk: whether AI-generated video follows the same pattern of initial excitement and rapid user attrition that killed Sora, or whether Kling's professional-grade product can sustain the engagement needed to justify its valuation.

This article is for informational purposes only and does not constitute investment advice.