Within a span of four days, Tencent executed two contrasting moves concerning its investment in Kuaishou. On July 2nd, Kling AI, a subsidiary of Kuaishou, secured up to $3 billion (approximately RMB 20.4 billion) in external funding, with Tencent participating as an investor. Post-investment, Kling AI's valuation reached approximately $18 billion (around RMB 122.3 billion). Merely four days later, on July 6th after market close, Tencent sold 273 million Kuaishou shares via a block trade, raising about HK$12.5 billion (roughly RMB 10.8 billion). This reduced its stake from about 15.68% to 9.37%, moving it out of the position of a major shareholder.
What is the strategy behind Tencent's simultaneous investment in an AI subsidiary and divestment from the parent company?
As of July 7th, TENCENT (0700.HK) shares closed at HK$461.2, up 2.04%, with a total market capitalization of HK$4.19 trillion. KUAISHOU-W (1024.HK) shares closed at HK$40.46, down 12.04%, with a total market capitalization of HK$175.1 billion.
Investing in Kling While Selling Kuaishou
Tencent first made an "addition." On the evening of July 2nd, Kuaishou announced on the Hong Kong Stock Exchange that Beijing Kling Intelligent Technology Co., Ltd., the independent operating entity for its video generation large model "Kling AI," had finalized external funding of up to $3 billion, with nearly $2.8 billion (about RMB 19 billion) already committed.
The investor lineup for Kling AI is considered top-tier, gathering a significant portion of China's internet and industrial capital. The announcement listed 34 investors in total, with lead investors including CPE Yuanfeng, Guofang Chuangtou, BlueFive, Zhongguancun Science City Fund (in conjunction with Guoke Investment), and CITIC Securities.
Tencent was one of the lead investors. Notably, BAT (Baidu, Alibaba, Tencent) made a rare joint appearance in this funding round. Specifically, Tencent invested a total of RMB 1.363 billion through two entities, Shanghai Qishan Investment and Parallel Mars Investment, acquiring a 1.12% stake. Alibaba invested RMB 1.363 billion through Hangzhou Aliyun Feitian Information Technology Co., Ltd., for a 1.11% stake. Baidu invested RMB 341 million for a 0.28% stake.
An industry expert pointed out that although the shareholding percentages are not high, the participation of the "big three" signals that video generation models have become a foundational element for next-generation content production. Not being involved risks exclusion from industry standards.
Just four days later, Tencent performed a "subtraction" on Kuaishou's parent company.
On July 6th after market close, Kuaishou issued another announcement: Tencent Holdings sold an aggregate of 273 million Kuaishou Class B shares via an off-market block trade to several independent third-party buyers. The buyers were not connected to Kuaishou or its associates. Following the sale, Tencent's stake decreased from about 15.68% to 9.37%, and it ceased to be a major shareholder.
The official transaction price was not disclosed. According to prior reports, the price range was between HK$43.15 and HK$44.53 per share, with a maximum cash-out equivalent to approximately RMB 10.8 billion.
More noteworthy is the comparison of two sets of data. First, Kling AI's post-investment valuation is $18 billion, while Kuaishou's closing market cap on July 6th was approximately HK$199.5 billion (about $25.6 billion). This means the valuation of this single subsidiary business already exceeds 70% of Kuaishou's total market capitalization.
However, Kling's current revenue contribution to Kuaishou's overall business is not high. In 2025, Kuaishou's total revenue was RMB 142.776 billion, while Kling contributed RMB 1.04 billion during the same period, accounting for less than 1% (0.73%) of the group's total revenue.
On another front, Kling AI has signed a 5-year IPO-related agreement. The announcement states that if Beijing Kling fails to complete an IPO by October 30, 2031, investors have the right to request the company to repurchase all or part of their equity at "investment principal plus 8% annual simple interest." Additionally, according to reports, Kuaishou has designed an incentive scheme for the Kling AI team—if the future IPO valuation reaches $40 billion, the team will receive substantial rewards. Reports also indicate that individuals close to the deal revealed Kuaishou plans to initiate the process for Kling AI's Hong Kong IPO within the next 12 months.
Exiting Mature Assets for Gains, Betting on the Future
The relationship between Tencent and Kuaishou started on a significant note. In 2017, Kuaishou completed a $350 million Series D funding round led by Tencent. At that time, Kuaishou was a key player in the short video landscape. Over the following years, Tencent continued to invest in multiple rounds, accumulating approximately $5 billion in total investment.
When Kuaishou listed on the Hong Kong Stock Exchange in February 2021, Tencent held a 21.57% stake, firmly positioned as the largest institutional shareholder. Post-listing, Tencent entered a gradual divestment phase. In April 2023, Tencent's affiliated investment platform, Parallel Nebula, distributed approximately 51.16 million Kuaishou Class B shares in-kind to external LPs. Subsequently, Tencent's shareholding continued to be diluted, reaching about 15.68% by the end of 2025.
Now, with a one-time sale of 273 million shares reducing its stake to 9.37%, Tencent has exited the major shareholder position. From 21.57% to 9.37% over approximately five and a half years, the shareholding has nearly halved.
However, "exiting" does not equate to "bearish." Fundamentally, Kuaishou remains a profitable company. For the full year 2025, Kuaishou achieved revenue of RMB 142.8 billion, a year-on-year increase of 12.5%. Adjusted net profit was RMB 20.6 billion, up 16.5% year-on-year, with the adjusted net profit margin rising to 14.5%. Both revenue and profit hit record highs. For the first quarter of 2026, Kuaishou's revenue was RMB 33.716 billion, with a net profit of RMB 2.903 billion.
But the maturity of the business model also implies another issue: the growth potential is not as vast as before. The short video traffic landscape is largely stable, live streaming gifting has passed its high-growth phase, and e-commerce faces intense competition from giants like Douyin, Taobao, JD.com, and Pinduoduo.
For Tencent, this was an investment with a sufficiently long holding period and returns that have been fully validated. Divesting at this stage resembles a market-driven exit for Tencent.
Tencent stated in its announcement that it remains confident in Kuaishou's long-term development prospects, and both parties will continue to maintain a mutually beneficial relationship, including extending their strategic cooperation. Kuaishou also responded, stating this divestment would not have any material adverse impact on the group's operations.
In other words, this is a "peaceful separation" style portfolio adjustment: Tencent is stepping back from a mature asset to reserve ammunition for the next battle.
An industry commentator analyzed that Tencent extracting capital from its Kuaishou investment to support Kling AI is, in a sense, a strategic maneuver. The impressive performance of ByteDance's Seedance (also known as Dream) around the Chinese New Year, and the initial integration of that AI-generated video large model with ByteDance's products, particularly Douyin short videos, have significantly increased pressure on Tencent, which is also exploring advancements in the AIGC field. Supporting Kuaishou and Kling has dual motivations: Kling was a leading domestic large model that outperformed Sora before Seedance's debut and sparked multiple trends overseas, coupled with the irreconcilable rivalry between Kuaishou and Douyin in the short video sector. "The enemy of my enemy is my friend." Relying solely on its own research and operations in the AI-generated video field at this moment might risk being overtaken by ByteDance's technological dominance in the visual presentation realm of AIGC, similar to how algorithmic recommendations once swept across content platforms from text to short videos. Strategic balancing has become a primary driver for the investment.
The "Tencent Concept" is Evolving Its Approach
Placing this transaction within the context of Tencent's investment activities over the past few years provides clearer insight. Over the past decade-plus, companies like JD.com, Meituan, and Sea have been on Tencent's investment list, including Kuaishou. In recent years, Tencent has successively exited part of its holdings in JD.com, Meituan, and Sea through in-kind distributions or divestments. These companies share a common trait: they were once the most representative external investments of the "Tencent ecosystem." Tencent's investments back then were not solely for financial returns but also to complement its ecosystem: JD.com for e-commerce, Meituan for local services, Sea for overseas gaming and e-commerce, and Kuaishou for short video content.
But today, Tencent no longer needs large equity stakes to demonstrate its ecosystem's presence. WeChat remains one of the strongest gateways in the Chinese internet, with gaming, advertising, fintech, and enterprise services constituting Tencent's core profit sources. Meanwhile, the regulatory environment, capital market valuation systems, and the AI technology cycle have all changed. The past "Tencent concept" revolved around traffic alliances and equity maps; today's Tencent investments focus more on cash returns, strategic synergy, and technological scarcity.
Kling AI恰好踩中了新的关键词。It is not a traditional platform nor a simple content community, but an AI video generation tool. Its target users are not limited to creators within the Kuaishou platform but could also include advertising agencies, film and television teams, cross-border sellers, short drama producers, and global content creators. If Kling can convert user growth into stable paid subscriptions, its valuation logic would shift from being based on a short video platform's DAU and user engagement time to that of an AI application's subscription revenue, model capabilities, and global market potential.
A co-founder of a new productivity think tank believes the entire internet industry has transitioned from a period of high user growth红利 to a state of存量 competition. The growth ceiling for mature platforms is gradually becoming clear, and corresponding valuation models are shifting from早期 user growth定价 to现金流分红定价. Tencent's own investment strategy is adjusting accordingly, gradually reducing holdings in mature platforms with slowing growth and redeploying the recouped capital into high-growth areas more aligned with the next industrial cycle, with AI being the core direction. This divestment from Kuaishou precisely embodies this shift in asset pricing logic. It is neither a negation of Kuaishou's business itself nor short-term financial speculation, but a mid-to-long-term allocation adjustment made at an industry cycle inflection point.
For Tencent, Kuaishou's stock represents an asset that has already gone through one cycle; Kling is an entry ticket into the new cycle. The former allows for profit realization, the latter for securing a position. One leans towards financial discipline, the other towards future potential.
Of course, Kling's story cannot be judged solely by valuation. AI video is still in a capital-intensive stage, with challenges in computing costs, model iteration, copyright risks, content moderation, and commercialization efficiency—each posing significant hurdles. Whether the $18 billion valuation holds will ultimately depend on revenue quality, customer retention, and profit pathways. Especially if there are future IPO plans or上市-related agreements, Kling needs to prove it is not merely "an AI story Kuaishou tells the capital market" but a business capable of独立 growing up.
Kuaishou's greatest potential for imagination may now be shifting from the short video platform itself to the AI asset incubated within it.
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