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TikTok’s owner, ByteDance, plans to spend more than $12 billion on artificial intelligence infrastructure this year. It is counting on cutting-edge technology to bring new growth, but is also under pressure from Washington to sell its popular video-sharing app in the United States.
He wants to shop at home and overseas
The Beijing-based company has earmarked 40 billion renminbi ($5.5 billion) to buy artificial intelligence chips in China by 2025, according to two people familiar with its plans. That would double the amount it spent last year. The group also plans to invest about $6.8 billion overseas to boost its capacity to train basic models using advanced Nvidia chips.
About 60 percent of ByteDance’s domestic semiconductor orders would go to Chinese suppliers such as Huawei and Cambricon. The rest would be spent on Nvidia chips, which have reduced performance to comply with US export regulations, according to the sources.
Beijing has informally instructed Chinese technology companies to buy at least 30 percent of their chips from their own suppliers, sources told the Financial Times. Foreign investment of $6.8 billion was earmarked in the budget to build ByteDance’s computing capacity in the field of artificial intelligence for model training.
The investment could run into problems stemming from recently expanded US export regulations aimed at preventing Chinese companies from creating sensitive technologies.
Trump does not rule out tariffs
The effort comes as ByteDance faces pressure in its core social media business. TikTok restored services to 170 million US users on Sunday after President-elect Donald Trump vowed not to hold companies that distributed and hosted the platform liable for violating the US law to sell or ban the video app.
Although Trump signed an executive order on Monday to keep TikTok operating for 75 days, he also said he wants an American company to own 50 percent of TikTok’s shares in the future. Trump said he could “certainly” slap tariffs on China if it rejects the deal.
Any such transaction could affect plans for an initial public offering of ByteDance, which valued itself at $300 billion during a recent share buyback program. The company laid out its huge budget for the purchase of GPUs in 2025 even before the recent interventions in the United States.
ByteDance is a leader in artificial intelligence
ByteDance, led by the tech group’s founder Zhang Yiming, has become a leader in China’s artificial intelligence race. It is doubling down on funds to build its own AI infrastructure to train its core model, as well as implement AI features across platforms.
It has increased computing capacity in Southeast Asia, particularly in Malaysia. Although Chinese companies are barred from buying Nvidia chips outside the United States starting in 2023, they have been able to secure access to the chips through leases with third-party data center providers, multiple industry insiders said.
That loophole was closed last week by the outgoing Biden administration. It has issued new rules that require the identity of both the owner and the operator of the chips to be reviewed. Trump could take a different stance on export controls, but if the regulations were strictly enforced, they would make it more difficult than ever for ByteDance to buy chips abroad.
According to one of the Financial Times sources, the company has already placed large orders this year to build overseas AI capacity, for example through lease agreements. That should be enough for most of the company’s needs in 2025, but what happens after that remains uncertain, the source added.
A popular chatbot
The news portal The Information previously reported on ByteDance’s budget for purchases of artificial intelligence chips abroad. In response to the FT report, ByteDance said: “Information from anonymous sources about our plan is incorrect.”
ByteDance is also facing pressure from solvent local competitors such as Baidu, Alibaba and Tencent, which are investing heavily in generative artificial intelligence. Along with these rivals, it is pushing more capable models and lowering costs for developers.
Chinese companies have yet to build domestic AI data center capacity to support the use of AI applications even after the models are trained. ByteDance plans to use most of its Chinese AI chips — including Huawei’s Ascend and Cambricon — for “inference” tasks, the calculations that run large language models to generate an answer to a request.
ByteDance released its Doubao chatbot in August 2023, and the app has become the most popular AI app in China, according to analytics website Aicpb.com. Doubao, which means “seat bag” in Chinese, had 71 million regular monthly active users in December. OpenAI has 300 million weekly active users worldwide.
They are led by Microsoft and Amazon
Nvidia reported $11.6 billion in revenue from China, including Hong Kong, during the first three quarters of 2024, or about 13 percent of its global revenue, according to company filings.
ByteDance is by far Nvidia’s biggest client in China. TikTok’s parent company can only buy less advanced chips for Chinese data centers, such as Nvidia’s H20, a specialized and less powerful version of its GPU that is tailored to meet US export regulations.
According to the estimates of technology consulting company Omdia, in 2024 it ordered about 230,000 Nvidia chips, mostly H20. For comparison, last year Microsoft bought 485,000 more advanced Hopper chips and 224,000 chips were acquired by Meta.
According to Omdia, technology companies worldwide will spend an estimated $229 billion on servers in 2024. The highest capital expenditures were Microsoft at $31 billion and Amazon at $26 billion.
Additional information was provided by Ryan McMorrow in Beijing andDemetri Sevastopulo in Washington.
