Kuaishou May Spin Off Kling AI with $20 Billion Valuation, Eyeing Independent Listing and $2 Billion Bet

Kuaishou Officially Considering Kling AI Spin-Off

On May 12, 2026, Kuaishou’s stock price on the Hong Kong Stock Exchange surged by 11% at one point. The spike was triggered by reports that the company plans to spin off its video-generation AI unit “Kling AI” with a valuation of $20 billion (approximately ¥3 trillion) and raise $2 billion in funding. Later that afternoon, Kuaishou confirmed that its board of directors is evaluating a proposal to restructure Kling and secure external funding, further heightening market expectations.

As of the previous day’s closing price, Kuaishou’s market capitalization stood at approximately $28.6 billion. Kling AI’s valuation represents 69% of the parent company’s value, effectively granting the spin-off a premium that surpasses its parent. However, Kling’s total revenue for 2025 was only ¥1.04 billion, accounting for merely 0.73% of Kuaishou’s total revenue of ¥142.8 billion. Based on Kling’s first-quarter revenue of $75 million in 2026, its annualized revenue (ARR) is estimated to be around $300 million, pegging the $20 billion valuation at a price-to-sales ratio (PSR) of 67 times. In contrast, Kuaishou itself has a PSR of just 1.5 times, which is lower even than traditional manufacturing companies.

Discrepancy in Valuation: The Role of the AI Narrative

Market insiders have dubbed this spin-off strategy as a “$10 billion glorification.” On the surface, Kuaishou appears to be leveraging the AI wave to reevaluate its enterprise value, but in reality, analysts suggest this might be a speculative move exploiting the shifting narratives in capital markets.

A financial analyst commented, “Separating a high-premium AI business from a mature traditional business to achieve differentiated valuation is a strategy commonly employed by tech companies worldwide, such as Google spinning off Waymo. In Kuaishou’s case, placing Kling in the AI domain allows it to secure a valuation premium dozens of times higher, despite contributing less than 1% to overall revenue.”

Three challenges have been highlighted in evaluating Kling’s valuation. First, discrepancies in ARR calculation standards could lead to significant fluctuations in monthly revenue figures. Second, the market ceiling for vertical video-generation models is lower compared to general-purpose large-scale model companies. Third, Kling’s PSR is already beyond reasonable bounds compared to competitors, ranking third in technological prowess behind ByteDance and Alibaba.

Growth Bottlenecks and Competitive Pressures

While Kling’s commercialization is progressing rapidly, structural vulnerabilities persist. Approximately 70% of its revenue depends on consumer subscriptions, with low user retention rates. Its corporate customer base is limited, relying primarily on small-scale creators and lacking large-scale clients.

The $20 billion valuation is based on projections that Kling will achieve an ARR of $1.3 billion by the first quarter of 2027. To meet this target, Kling would need to grow by 330% within 12 months, an exceptionally ambitious goal. Kuaishou plans to allocate ¥26 billion in capital expenditures for 2026, with most of it directed toward Kling. However, this amount exceeds Kuaishou’s adjusted net profit for 2025, raising concerns about potential financial strain if Kling fails to meet its growth targets.

The competitive landscape is also challenging. Entry barriers for AI video-generation technology remain low, and the loss of key talent is a pressing issue. Kling’s original developer has already moved to Alibaba to develop competing models. In terms of computational power, Kuaishou’s planned capital expenditure is less than one-seventh of ByteDance’s AI-related investments, making it difficult to scale rapidly.

In international markets, Kling’s first-mover advantage is waning. ByteDance’s Seed 2.0 has been incorporated into the overseas version of CapCut, which boasts four times the monthly active users of Kling. Coupled with competition from global tech giants like Google and X AI, Kling’s market space is expected to face increasing pressure.

Conclusion: A High-Stakes Gamble Full of Risks

Kuaishou’s plan to spin off Kling AI represents a bold move to capitalize on the AI narrative and reevaluate its corporate value. However, the significant disparity in valuation, growth bottlenecks, and increasing competitive pressures make the success of this venture highly uncertain. As capital markets shift focus from traditional to high-growth AI narratives, this $10 billion gamble could ultimately determine Kuaishou’s fate.