In a major escalation of the global artificial intelligence arms race, ByteDance – the Chinese parent company of social media giant TikTok – is preparing to unleash a colossal investment in AI infrastructure next year. The planned spend comes despite persistent uncertainty over its access to the most advanced semiconductor technology from US giant Nvidia.
A Multi-Billion Pound Bet on AI Core Infrastructure
The company has set its sights on a capital expenditure budget of approximately RMB 160 billion (£17 billion) for 2026, a significant increase from the roughly RMB 150 billion (£15.7 billion) allocated this year. The lion's share of this increase is earmarked for building out the hardware and systems needed to power AI across its vast portfolio.
This strategic move underscores a fundamental shift: AI is no longer a niche feature but is rapidly becoming the core infrastructure for consumer platforms like TikTok. Companies are in a fierce race to embed generative AI tools into every revenue-critical area, from search and content creation to targeted advertising.
Of the total budget, around half – roughly RMB 85 billion (£8.9 billion) – is dedicated solely to purchasing advanced AI processors. This commitment highlights the immense cost of competing at the highest level, even as Chinese firms navigate strict US export controls designed to limit their access to cutting-edge chips.
Navigating the Geopolitical Chip Landscape
The shadow of US sanctions looms large over ByteDance's ambitious plans. The company's ability to secure Nvidia's most powerful hardware remains constrained. However, following a recent decision by the Trump administration to allow limited sales to "approved customers" in China, ByteDance is understood to be planning a trial purchase of around 20,000 Nvidia H200 processors.
The H200 is a less powerful alternative to Nvidia's latest flagship chips, but broader access to it could prompt ByteDance to further increase its AI spending for 2026. In the meantime, export restrictions have forced Chinese tech groups, including ByteDance and Alibaba, to innovate differently, focusing on developing more efficient AI models that require less computing power and are cheaper to deploy.
Consumer Success and Strategic Advantages
These constraints have not slowed ByteDance's progress on the consumer front. Its 'Doubao' AI chatbot has reportedly overtaken DeepSeek to become China's most popular AI assistant by monthly users and downloads, according to data from QuestMobile. Analysts at Goldman Sachs note that ByteDance's AI services are now the most used in China, with daily token consumption hitting over 30 trillion in October.
Furthermore, ByteDance's status as a privately-owned company is viewed as a key strategic advantage. Not being publicly traded grants it greater freedom to invest aggressively and absorb short-term costs while executing long-term AI plans, a luxury not always available to rivals answering to quarterly shareholder expectations.
Despite its enormous planned investment, ByteDance still trails its US competitors. Tech behemoths like Microsoft, Alphabet (Google's parent), Amazon, and Meta have together spent a staggering more than $300 billion this year alone on the data centres that power their AI ambitions.
ByteDance is also expanding its enterprise reach, pushing its Volcano Engine cloud platform to businesses, positioning it in more direct competition with Alibaba Cloud. Alongside billions spent on leasing overseas data centres to legally access advanced hardware, ByteDance is unequivocally positioning AI as the central engine for its future consumer products and revenue streams. The company declined to comment on its reported spending plans.
