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China’s artificial intelligence funding race gathered further momentum after video-generation startup Kling AI secured one of the largest financing rounds in the country’s generative AI sector, drawing backing from some of China’s biggest technology companies as competition with U.S. AI leaders intensifies.

Kuaishou Technology said Thursday that a consortium of investors led by Alibaba and Tencent will inject more than 19 billion yuan ($2.80 billion) into Kling AI, valuing the AI video platform at about $15 billion on a pre-money basis.

The deal comes at a time when China’s AI ecosystem is attracting record levels of funding. Technology companies have raised roughly $3.1 billion through stock market listings in China this year through mid-June, according to Reuters calculations, more than five times the amount raised during the same period last year. Investors have increasingly shifted their attention toward AI-related businesses as Beijing pushes technological self-sufficiency and domestic companies accelerate efforts to compete with leading U.S. developers.

Under the terms of the fundraising, Kling AI can admit one additional investor within the next two months, bringing the total financing to as much as 20.45 billion yuan. Once the transaction is completed, Kuaishou’s ownership in Kling AI will fall to approximately 68% from its current 100%, while the parent company will retain majority control over the fast-growing business.

The investor lineup includes some of China’s most influential technology firms. Alibaba, Tencent and Baidu have all agreed to acquire stakes in Kling AI, highlighting broad industry confidence in AI-generated video as one of the fastest-growing segments of generative artificial intelligence.

The participation of China’s internet heavyweights is notable because each company is simultaneously investing billions of dollars into its own AI ambitions. Alibaba has sharply increased spending on AI infrastructure and cloud computing while developing its Qwen family of large language models. Tencent has expanded investments in foundation models and AI applications across gaming, advertising and enterprise software. Baidu continues to commercialize its Ernie models while also developing AI chips and autonomous driving technologies.

Kling AI has emerged as one of China’s leading AI video-generation platforms, competing against both domestic rivals and international products such as OpenAI’s Sora and Google’s Veo. Demand for AI-generated video has surged over the past year as enterprises, advertisers, filmmakers and content creators seek cheaper and faster methods of producing high-quality visual content.

The company’s rapid commercial expansion appears to be validating investor enthusiasm. Kling AI generated 650 million yuan in revenue during the quarter ended March, more than quadrupling from a year earlier, demonstrating that enterprise demand for AI-generated content is translating into meaningful revenue growth rather than remaining purely experimental.

The strong financial performance also distinguishes Kling AI from many AI startups that continue to prioritize user growth over monetization. As investors focus on commercial viability following the first wave of generative AI adoption, companies capable of producing significant recurring revenue have attracted premium valuations.

Analysts said the fundraising valuation itself broadly matched market expectations, but the caliber of participating investors stood out.

Citi analysts described the shareholder roster as “impressive,” noting that attention will now shift toward Kling AI’s next-generation product upgrades, which are expected to determine whether the company can maintain its rapid growth and defend its leadership position in China’s increasingly crowded AI video market.

The financing is seen as part of a broader restructuring strategy by Kuaishou. In May, the company acknowledged it was exploring options for reorganizing Kling AI after media reports suggested a potential spin-off. At the time, management emphasized that discussions remained preliminary, but Thursday’s capital raise represents the clearest step yet toward establishing Kling AI as a more independent business capable of attracting outside capital.

Creating standalone AI subsidiaries has become a common strategy among major technology companies seeking to unlock value while giving high-growth AI businesses greater operational flexibility. Separate financing also enables AI units to raise capital without placing additional pressure on parent companies already investing heavily in data centers, semiconductors and computing infrastructure.

The transaction arrives amid an escalating global race to finance AI development. Chinese companies are aggressively raising capital to build computing capacity, train increasingly sophisticated foundation models and develop AI applications spanning video, coding, enterprise software and robotics.

That competition mirrors developments in the United States, where companies including OpenAI, Anthropic and xAI have secured record funding rounds to finance massive investments in AI chips and data centers.