Hot Stock Commentary | Kuaishou’s 'Kling AI' Raises Nearly $3 Billion; Kuaishou May See Valuation Re-rating

On July 2, $KUAISHOU-W (01024.HK)$ Announced that its video-generative large model 'Kling AI' has completed a financing round of nearly $3 billion, achieving a post-money valuation of $18 billion.

The investor lineup is not composed of ordinary financial investors. On the industrial capital side, $TENCENT (00700.HK)$ 、 $BABA-W (09988.HK)$Alibaba Cloud and $BIDU-SW (09888.HK)$ have all participated; in the cultural and entertainment sector, funds affiliated with Huace Film & TV and Mango-related industrial investors have joined; in addition, multiple state-owned investment funds and market-driven capital have also co-invested. For an AI application company, such a shareholder structure is often more significant than the fundraising amount alone. Kling stands to gain synergies across multiple dimensions, including cloud resources, distribution channels, enterprise clients, film and television production, and advertising and marketing.

This financing round signifies more than just a headline number—it simultaneously addresses two lingering market concerns regarding Kuaishou:How will AI investments be funded? How should AI assets be valued? With these two questions now resolved, Kuaishou’s valuation framework is undergoing a structural shift, warranting a systematic reassessment.

1. This round of financing has alleviated the valuation pressure on Kuaishou.

A key rationale behind the market's previous suppression of Kuaishou's valuation was concern that sustained AI investments would continue eroding core business profitability. CICC forecasts Kuaishou’s 2026 capital expenditures to reach RMB 26 billion, primarily concentrated in the first half of the year, with Q1 already approaching half of the full-year budget. Against this backdrop of significantly higher Capex, adjusted operating margin declined by approximately 3 percentage points year-over-year.

Following this round of financing, the logic chain has changed. Kuaishou, through external funding and a separate legal entity, has transformed this AI investment intoa separately capitalizable business segment. The secondary market no longer views Kuaishou’s AI unit solely as a "drag" on its core operations but is beginning to reassess its long-term value appreciation potential as an independent AI asset using a sum-of-the-parts (SOTP) approach.

II. From a temporal perspective, the realization path unfolds in three phases

📍 Short term: Valuation re-rating

The post-money valuation of Kuaishou’s AI unit at USD 18 billion provides a clear pricing anchor for its AI assets. Beyond valuing Kuaishou based on its platform advertising, e-commerce, and live-streaming businesses, the market is gradually shifting toward an SOTP framework. The mere existence of this valuation anchor serves as a near-term catalyst.

📍 Medium term: Commercialization realization of Kuaishou’s AI model (3 key observation variables)

① Whether ARR can exceed USD 1 billion by the end of 2026,This is currently the biggest point of divergence among sell-side analysts when building valuation models. As of March 2026, ARR was already nearing USD 500 million, with Q1 2026 revenue exceeding RMB 650 million, representing over 300% year-over-year growth. Extrapolating from current growth rates, reaching USD 1 billion by year-end is not out of the question—but sustained growth momentum needs further validation.

② Whether the share of B2B clients and API revenue continues to rise,determines the sustainability of the business model. A pure consumer subscription model carries high marginal costs; if the share of API and enterprise revenue increases, the profit structure will improve significantly.

③ Whether more landmark use cases emerge in film & TV, marketing, and short dramaswill determine whether the narrative around industry penetration gains credibility.

📍 Long term: AI feeding back into Kuaishou’s core business

If Kuaishou’s AI model can lower the barrier for advertisers to produce ad creatives and improve merchants’ ad efficiency, its value to Kuaishou will extend beyond equity investment returns toenhancing platform ecosystem efficiencyits infrastructure—a narrative that is harder to price than financial contributions but more valuable.

III. Market Divergence and Risks to Watch

⚠️ Establishment of a valuation anchor ≠ certainty of profitability

Kling’s biggest highlight currently is its high revenue growth. Although commercialization has been proven viable,the profit model has not yet been fully validated.Public disclosures indicate a RMB 1.9 billion loss in 2025. Video models are a high-inference-cost business, so revenue growth does not necessarily translate immediately into profit growth. Even if Kling secures independent financing, Kuaishou Group’s AI investment intensity remains high, with ongoing capital expenditure and depreciation pressure.

⚠️ Competition remains fierce, and the current lead is not secure

Kling’s main competitors currently include: ByteDance’s Seedance, Runway, MiniMax’s Hailuo, Alibaba’s multimodal models, Vidu, and PixVerse.Seedance 2.5 will launch in early July, extending video length to 30 seconds and supporting more modal reference materials. Kling’s SOTA position must be maintained through continuous version iterations—there is no permanent technological moat.

IV. Two Valuation Frameworks and Quantitative Analysis

📊 4.1 Implied P/E of Kuaishou's Core Business After Assigning Standalone Valuation to Keling

As of July 2$KUAISHOU-W (01024.HK)$ , the stock price stood at HK$42.64, implying a forward 2026 P/E ratio of approximately 10x. Excluding Keling’s valuation (post-money valuation of USD 18 billion), Kuaishou’s core business trades at an implied 2026 P/E of only about 2.7x. Even applying a 50% control discount to Keling, the implied P/E for Kuaishou’s core business remains around 7x, indicating that the market has yet to fully price in the value of its AI assets. The key focus of this approach isassigning a standalone valuation to Keling, but applying a discount to reflectthe upside potential in Kuaishou’s core business valuation。

Source: Bloomberg, compiled by Futu Wealth Management

📊 4.2 Impact on Kuaishou if ARR Falls Short of USD 1 Billion

Base-case assumptions:

– EV/ARR = 20x, Goldman Sachs’ sensitivity framework ranges from 10x to 25x, while Morgan Stanley and Everbright use 20x. We adopt 20x here, considering the company is in a growth phase with strong narrative appeal to IPO markets that favor high-growth stories.

– Control discount = 33%The control discount is a flexible variable. The discount may narrow if market confidence increases regarding Kuaishou’s financing, IPO timing, and monetization pace; conversely, if ARR falls short of expectations, the discount could widen. The average across sell-side analysts cited above is 33%.

– Kuaishou ownership stake = 68.33%

– Exchange rate USD:HKD = 7.84

– Per-share change in value =(USD 100 million × 20 × (1 − 33%) × 68.33% × 7.84) / 4.33 billion shares= HK$1.66 That is: ARR misses by USD 100 million, or HKD 1.66 per share. This approach treats Kuaishou's core business and Keling’s value as integrated, whereasKeling’s sensitivity analysis would not significantly impact Kuaishou.。

Source: WIND, Kuaishou Annual Report, Leidii, Unicorn Morning Brief

Summary: How should we view the current situation?

This financing round has addressed two core issues for Kuaishou: how to fund AI investments and how to value AI assets. Among Hong Kong-listed internet companies, Kuaishou now presents a relatively rare combination—low-PE core business + high-growth AI segment + a clear path toward a separate listing.

There are only two key variables to monitor at this point: the pace of ARR growth (whether it can approach USD 1 billion by end-2026) and the revenue share from API/B2B services (whether the business model can shift toward a higher-margin structure). Quarterly validation of these two variables will determine how far this valuation framework can go.

[Investment Advisory Information]

Yu Shilin, Licensed Representative, Central Entity Number: ATQ882

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