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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 while under pressure from Washington to sell its popular video-sharing app in the United States.
The Beijing-based company has budgeted 40 billion renminbi ($5.5 billion) to acquire AI chips in China in 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 enhance its core model training capabilities using advanced Nvidia chips.
About 60 percent of ByteDance's domestic semiconductor orders will go to Chinese suppliers such as Huawei and Cambricon, while the rest will be spent on Nvidia chips that have been relaxed to fall in line with U.S. export controls, according to the people.
The sources added that Beijing has given Chinese technology companies informal directives to purchase at least 30 percent of their chips from suppliers in the country.
$6.8 billion in outside investment is budgeted to build ByteDance's AI computing capacity for model training. This investment may face challenges from recently expanded US export controls designed to hinder Chinese companies building sensitive technologies.
Payment comes as ByteDance It 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, pledged that the companies that distributed and hosted the platform would not be held liable for violating US law that bans the video app unless it is sold.
While Trump He signed an executive order To keep TikTok open for 75 days, he said Monday that he wants a US company to have 50 percent ownership of TikTok in the future. Trump said he could “absolutely” impose tariffs on China if it rejected the deal.
Any such deal could impact ByteDance's IPO plans in the future, as the company values itself at $300 billion during a recent stock buyback program.
The company had set a huge purchase budget for GPUs in 2025 before the recent interventions in the United States.
ByteDance, which under technology group founder Zhang Yiming has become a front-runner in China's AI race, is doubling down on building its own AI infrastructure to train its core model, as well as implementing AI functions across its various platforms.
It has boosted computing capacity in Southeast Asia, especially in Malaysia. Although Chinese companies have been banned from purchasing Nvidia chips outside the United States since 2023, they have managed to secure access to the chips through leasing agreements with third-party data center providers, several industry insiders said.
This loophole was closed last week by the outgoing Biden administration, which issued new rules stipulating that the identity of both the owner and operator of the chips must undergo a review process.
While Trump could take a different stance on export controls, the regulations — if strictly enforced — will make purchasing ByteDance chips abroad more difficult than ever.
It has already placed significant orders to build AI capabilities abroad this year, for example through lease agreements, according to one of the people. He added that it should be enough for most of the company's needs in 2025, but what happened after that remained uncertain.
ByteDance's budget for purchasing AI chips abroad was previously reported by news outlet The Information. In response to the FT report, ByteDance said: “Anonymous information about our plan is incorrect.”
ByteDance also faces challenges from wealthy local rivals, such as Baidu, Alibaba and Tencent, which are investing heavily in generative AI. Along with these competitors, it has introduced more capable models and reduced costs for developers.
Chinese companies still need to build the capacity of local AI data centers to support the use of AI applications even after the models are trained.
ByteDance plans to use most Chinese AI chips – including Huawei's Ascend and Cambricon – For “reasoning” tasks.the computation that large language models perform to generate a response to a prompt.
ByteDance released its AI-powered chatbot Doubao in August 2023, and the AI app has become the most popular AI application in China, according to website analytics website Aicpb.com.
Dubao, which means “cloth bag” in Chinese, had 71 million regular monthly active users as of December, compared to OpenAI's 300 million weekly active users globally.
Nvidia reported revenue of $11.6 billion 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 Nvidia's largest customer in China. TikTok's parent company can only buy less advanced chips like Nvidia's H20 for Chinese data centers, a specialized, less powerful version of its GPUs designed to comply with U.S. export controls.
In 2024, it will order about 230,000 Nvidia chips, mostly H20s, according to estimates from technology consulting firm Omdia. This compares with 485,000 of the more advanced Hopper chips that Microsoft bought last year and 224,000 chips acquired by Meta.
Technology companies worldwide spent an estimated $229 billion on servers in 2024, according to Omdia, led by Microsoft's $31 billion in capital expenditures and Amazon's $26 billion.
Additional reporting by Ryan McMorrow in Beijing and Dmitry Sevastopoulou in Washington
