Kuaishou’s recent decision to spin off its high-performing video generation unit, Keling AI, marks a pivotal shift in how China’s internet titans manage the crushing costs of the generative AI revolution. By targeting a $20 billion valuation for an independent Pre-IPO round, Kuaishou is effectively attempting to offload the massive capital expenditures required for compute and server infrastructure. This maneuver allows the parent company to protect its bottom line while letting the market price Keling as a high-growth startup rather than a subsidiary cost center.
Keling AI has demonstrated remarkable growth, with its annual recurring revenue jumping fourfold in a single year to nearly $500 million. However, the financial strain is evident; Kuaishou’s capital expenditure is projected to balloon to 26 billion RMB in 2026, driven largely by the insatiable compute needs of its AI models. Investors have signaled their approval of this 'decoupling' strategy, as Kuaishou’s stock surged following news that it would no longer have to solo-fund the unit’s multi-billion dollar development path.
Attention is now turning to ByteDance and its flagship AI assistant, Doubao, which has surpassed 100 million daily active users to become China's dominant AI native application. Despite its success, Doubao faces the same 'success trap' as Keling: the more it scales, the more it costs to maintain. ByteDance has already laid the groundwork for a potential spin-off by implementing a 'virtual stock' incentive program for the Doubao team, creating an internal equity structure that could easily transition into a standalone entity.
This trend is not limited to Kuaishou and ByteDance, as Alibaba and Baidu have explored similar paths for their semiconductor and AI-specific divisions. For unlisted giants like ByteDance, spinning off a high-value asset like Doubao offers a way to unlock liquidity and establish a valuation benchmark while the parent company’s own IPO remains in limbo. As the 'token economy' matures, the model of the monolithic tech conglomerate appears to be giving way to a more fragmented, venture-backed ecosystem of specialized AI champions.