Summary of the Core Content in Plain Language
There’s a particularly absurd “asset anomaly” in the internet industry: Kuaishou, a short-video platform that has been around for over a decade and boasts 800 million monthly active users, has a total market value of only over HK$14 billion. Meanwhile, its recently funded AI subsidiary, Keling AI, has already reached a pre-IPO valuation of HK$14 billion. This means that if you buy 100 HKD worth of Kuaishou stocks in the secondary market, more than HK$70 of that value is attributed to Keling AI’s assets. The remaining amount is essentially equivalent to getting the entire Kuaishou platform’s live streaming, advertising, and short-video ecosystem for free. Netizens jokingly say it’s like “buying Kuaishou and getting a large part of an AIGC (Artificial Intelligence Generated Content) unicorn for free.”
Kuaishou is actively pushing for Keling AI to go public independently by 2027. The goal is not to sell the AI company for quick cash out but to ensure a win-win situation for both parties by fully considering the benefits and risks. This strategy allows the AI assets to generate high returns for the main platform while also sharing the massive costs associated with advanced computing power. It also helps to isolate the potential destructive risks of the AI industry from the main business, ensuring a stable profit for both.
---
Explanation in Four Simple Dimensions
1. Understanding the Absurd “Buy One, Get One Free” Phenomenon: Why Has Kuaishou Become a Bonus?
Many people are puzzled by this. Kuaishou generates billions in revenue annually and has tens of millions of users, so why is it worth less than a newly developed AI model? The key lies in the different valuation logic of the two types of companies in the current capital market:
The Hong Kong stock market classifies Kuaishou as a “traditional traffic platform,” believing its growth has peaked, and thus assigns it a very low valuation—its price-earnings ratio is less than 10 times. This means you would spend HK$10 to buy Kuaishou stocks and only earn just over HK$1 in profit per year, which investors consider too expensive. However, AI companies are currently in the spotlight, and as long as they show rapid revenue growth, investors are willing to pay much higher multiples of their revenue. For example, if an AI company generates HK$1 in revenue, its market value could be several times that of a traditional platform.
To illustrate: Imagine you’ve had a market for 10 years that generates HK$1 million in annual revenue; a new AI tool developed by your son generates the same amount of revenue, but investors might value it at HK$10 million. In this case, the market you’ve built over the years becomes a bonus attached to the new AI company.
2. Kuaishou’s Urgency to Get Keling AI Public: It’s Not About Quick Profit, but Avoiding Collapse
On the surface, Keling AI’s quarterly revenue of HK$850 million seems impressive, but there are two significant challenges:
- High Cost of Operations: Keling AI has lost over HK$2 billion in five quarters, mainly due to the expensive purchase of high-end graphics cards and rental of servers for computing power. This has dragged down Kuaishou’s profit growth. Last year, Kuaishou’s profit was HK$5.6 billion, but this year it’s only HK$390 million. If Kuaishou continues to bear these costs alone, its positive cash flow could be severely impacted. By listing Keling AI, it can share the costs with external investors.
- The Timely Window for Success: The global market is competing for the title of the “first AI video company to go public.” The first to do so will enjoy a significant valuation advantage. Other AI video companies, both overseas and domestic, are also striving for this title. If Kuaishou delays, its valuation could be halved. Moreover, the investment funds in Keling AI have deadlines for exit, leaving only about a year to achieve significant growth before the window closes.
3. The Split Isn’t About Letting the Subsidiary Go Solo: Two Sets of KPIs for Maximum Benefits
Many think a subsidiary’s listing will make it independent of the parent company, but Kuaishou has designed two sets of independent evaluation criteria to maximize benefits for both:
- For the Stock Market: Keling AI’s performance is measured by its overseas revenue and API usage. Currently, 80% of its revenue comes from providing AI video generation services to overseas companies and Hollywood studios, generating additional revenue. This positive data supports a high valuation and can drive the stock price upward after listing.
- For Kuaishou’s Main Business: Keling AI is integrated into Kuaishou’s advertising and short-video production systems, significantly reducing costs for businesses and creators. This increased efficiency boosts the platform’s revenue from advertising and short videos.
4. The Real Purpose of the Split: Buying Insurance for Kuaishou
The real goal of the split is to protect Kuaishou from potential risks in the AI industry. AI models often use copyrighted materials without proper authorization, which could lead to massive legal claims. By making Keling AI an independent company, Kuaishou can isolate its assets from the main business in case of such issues, ensuring that Kuaishou’s core business remains unaffected.
In summary, Kuaishou’s move is a strategic one that aims to leverage the high valuation of Keling AI while mitigating potential risks. It’s like buying “expensive insurance” for its main business. If the AI industry faces challenges, the damage can be limited to Keling AI, leaving Kuaishou’s core operations intact.