Kuaishou shares retreat after Tencent invests $2.8 billion into Kling AI unit

Beijing-based short video platform Kuaishou Technology shares opened higher in Hong Kong Friday after the company disclosed a large capital injection into its artificial intelligence unit, but the stock later fell back into negative territory as investors digested the details of Tencent’s participation and the planned dilution. Kuaishou’s shares were up as much as 6.89 percent at the start of trading, before paring gains and trading around 0.75 percent higher earlier in the session, according to CNBC’s market report.

The underlying catalyst was a disclosed funding round for Kuaishou’s Kling AI subsidiary. Kuaishou announced the capital injection after the market closed Thursday, and the filing described a total raise of 19 billion yuan, equivalent to about $2.79 billion, with Tencent as one of the backers. The investment, as reported, includes Tencent funding of $200 million.

CNBC reported that the round was structured to target a valuation of $15 billion for the Kling AI subsidiary. If that valuation is met under the terms of the deal, Kuaishou expects the transaction to dilute its stake in Kling AI. The report said the agreement would reduce Kuaishou’s holding in the subsidiary to 68 percent.

Tencent’s involvement drew particular attention because the conglomerate owns a competing generative AI platform, Hunyuan, which is described by CNBC as a domestic rival to Kling AI. CNBC also characterized the competitive environment around China-based AI video generators, noting that Kling AI has been working to expand beyond its home market.

Beyond Tencent, the funding round reportedly drew a broader consortium of investors. CNBC said 21 independent investors were part of the capital raise, in addition to Tencent, indicating the round was not limited to a single strategic partner. The size and the investor mix suggest that Kling AI is being positioned for accelerated commercialization through creator-facing products, rather than as a purely internal research effort.

Kling AI, according to the CNBC report, is organized as a creator studio offering AI-driven features. The unit has previously said it claims more than 60 million creators globally after launching in June 2024, a point CNBC included in its description of the business focus tied to the funding round.

For Kuaishou, the funding has direct implications for capital allocation and governance of the AI subsidiary. The reported dilution from the round also means Kuaishou will have reduced control relative to its starting ownership levels, even while remaining a majority holder at 68 percent under the terms described.

Friday’s stock move followed the pattern of investors initially rewarding the scale of the raise and the strategic backing by a major technology firm, then reappraising how dilution and competition could affect Kuaishou’s longer-term economics tied to Kling AI’s expansion. The next step for investors and market participants is continued disclosure of the funding terms and any related milestones as the transaction proceeds, with further filings likely to follow as regulatory and corporate processes are completed.