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TikTok owner ByteDance plans to spend more than $12 billion on artificial intelligence infrastructure this year, betting on cutting-edge technology for new growth as it comes under pressure from Washington to sell its popular app for video sharing in the US.
The Beijing-based company has budgeted 40 billion Rmb ($5.5 billion) to buy AI chips in China by 2025, according to two people familiar with the plans, which would double the amount it spent last year. The group also plans to invest about $6.8 billion overseas to improve its underlying model training capabilities using advanced Nvidia chips.
About 60 percent of ByteDance’s domestic semiconductor orders would go to Chinese suppliers such as Huawei and Cambricon, while the rest would be spent on Nvidia chips that have been watered down to comply with U.S. export controls, according to the people. .
Beijing has given Chinese tech companies informal instructions to buy at least 30 percent of their chips from the country’s own suppliers, the people added.
The $6.8 billion overseas investment was budgeted to build ByteDance’s AI computing capacity for model training. That investment could face challenges from recently expanded US export controls designed to prevent Chinese companies from building sensitive technology.
The push comes as ByteDance faces pressure in its core social media business. TikTok restored service to 170 million US users on Sunday after the country’s incoming president, Donald Trump, vowed that the companies that distributed and hosted the platform would not be held liable for violating a US law that banned the video app unless it was sold.
While Trump signed an executive order on Monday to keep TikTok open for 75 days, he said he wanted an American company to have 50 percent ownership of TikTok in the future. Trump said he could “certainly” impose tariffs on China if it rejects a deal.
Any such transaction could affect plans for an upcoming initial public offering of ByteDance, with the company valuing itself at $300 billion during a recent stock buyback program.
The company mapped out its big purchase budget for graphics processing units in 2025 ahead of the latest US interventions.
ByteDance, which under the leadership of the tech group’s founder Zhang Yiming has become the leader in China’s artificial intelligence race, is doubling down on building its own AI infrastructure to train its underlying model as well as implement the functions of AI on its various platforms.
It has increased computing capacity in Southeast Asia, particularly in Malaysia. Although Chinese companies have been barred from buying Nvidia chips outside the US since 2023, they have been able to secure access to the chips through lease agreements with third-party data center providers, some industry insiders said. .
That loophole was closed last week by the outgoing Biden administration, which issued new rules that the identity of the chip’s owner and operator must be subject to a review process.
While Trump may take a different stance on export controls, the regulations — if strictly enforced — will make buying ByteDance’s chips overseas more difficult than ever.
It has already placed large orders to build AI capacity overseas this year, such as through lease agreements, according to one of the people. That should be enough for most of the company’s needs in 2025, but what happened after that remained uncertain, the person added.
ByteDance’s budget for overseas AI chip purchases was previously reported by The Information newspaper. In response to the FT’s reporting, ByteDance said: “The anonymously sourced information about our plan is incorrect.”
ByteDance also faces challenges from deep-pocketed domestic competitors such as Baidu, Alibaba and Tencent, which are investing heavily in generative AI. Alongside these rivals, it has released more capable models and lowered costs for developers.
Chinese companies still need to build the capacity of AI data centers on the ground to support the use of AI applications even after the models have been trained.
ByteDance plans to use most of its Chinese AI chips – including Huawei’s Ascend and Cambricon – for “inference” tasks, the computation undertaken by large language models to generate a response to a request.
ByteDance released its AI chatbot Doubao in August 2023, and the AI app has become the most popular AI app in China, according to website analytics website Aicpb.com.
Doubao, which means “beanbag” in Chinese, had 71 million regular monthly active users as of December, compared to OpenAI’s 300 million weekly active users globally.
Nvidia recorded $11.6 billion in revenue from China, including Hong Kong, or about 13 percent of its global total, during the first three quarters of 2024, according to company filings.
ByteDance is by far Nvidia’s largest customer in China. Parent TikTok can only buy less advanced chips like Nvidia’s H20 for Chinese data centers, a specialized and less powerful version of its GPUs tailored to fit US export controls .
In 2024, it ordered about 230,000 Nvidia chips, mostly H20, according to estimates from technology consultancy Omdia. That compares with 485,000 state-of-the-art Hopper chips purchased by Microsoft last year and 224,000 purchased by Meta.
Tech companies worldwide will spend an estimated $229 billion on servers in 2024, according to Omdia, led by Microsoft’s $31 billion in capital spending and Amazon’s $26 billion.
Additional reporting by Ryan McMorrow in Beijing and Demetri Sevastopulo in Washington
