Kling AI's funding round just grew by a billion dollars, and Tencent, a company running its own rival video model, wants in.
China's Kling AI is close to closing a $3 billion funding round at an $18 billion valuation, according to a South China Morning Post report published July 1 citing people familiar with the matter. That's a full $1 billion more than what Bloomberg reported just two weeks earlier, when Kling was said to be seeking $2 billion at the same valuation with General Atlantic in talks to lead. The round has grown. The price tag on Kuaishou's AI video unit hasn't.
Tencent is now among the investors backing the round, per SCMP. That's notable on its own terms. Tencent runs Hunyuan, its own text-to-video model, and putting money into Kling puts it on both sides of the same race. It wouldn't be the first time a Chinese tech giant hedged its AI bets by funding a would-be rival rather than only building in-house, but the timing, weeks before Kling is expected to start its Hong Kong IPO process, makes the bet look like a statement of confidence as much as a financial position.
The valuation itself has been trimmed. Kuaishou first floated spinning off Kling at a $20 billion valuation back in April, a figure that made headlines when the spin-off news first broke. Three months later, the number that's actually closing is $18 billion, on a round that swelled from $2 billion to $3 billion. Investors want in. Just not at the original price.
What's pulling investors toward Kling despite the valuation cut is the growth underneath it. Kling's annualized revenue run rate reached roughly $500 million in the first quarter of 2026, up from $300 million in January, driven largely by the launch of Kling 3.0. First-quarter revenue alone topped 650 million yuan, about $95.8 million, and 75% of it came from customers outside China. That overseas share matters. It means Kling isn't just winning inside a protected domestic market. It's taking paying customers from Sora, Runway, and Google's Veo on the open field.
Kuaishou isn't slowing down on the spending side either. The company's total group capital expenditure is expected to hit roughly 26 billion yuan, about $3.8 billion, in 2026, up close to 11 billion yuan from the year before. Nearly all of that increase is going toward AI computing power, according to Kuaishou's own disclosures.
Video gets expensive, images get cheap
Here's the tension worth watching. While Kling raises billion-dollar rounds to scale video generation, Google just pushed the price of AI image generation toward zero. On June 30, Google introduced Nano Banana 2 Lite, an image model that generates a picture in about four seconds for $0.034 per 1,000 images, according to reporting from TechCrunch and VentureBeat. That isn't a typo. Google wants image generation so cheap that developers stop thinking about the cost at all.
Video hasn't gotten there yet, and that gap is exactly why Kling can raise $3 billion instead of $300 million. Video generation still eats enormous compute per clip, still requires the kind of infrastructure buildout Kuaishou is funding with that $3.8 billion capex figure, and still commands prices that make a real business out of a young product category. Image generation got commoditized first because it's computationally lighter. Video is following the same curve, just later and slower, and every lab building video tools is racing to lock in revenue and market position before that curve catches up to them too.
Frankly, that's the real story behind Kling's growing round. Not just a Chinese AI company raising money, but one trying to build a moat, in cash and compute, before the economics that just hit Nano Banana 2 Lite arrive at video generation as well. Kuaishou expects to start the Hong Kong listing process within the next twelve months, with IPO proceeds earmarked for data centers, compute, and the talent it needs to keep ahead of Sora and Veo before the market decides video should cost next to nothing too.
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