ByteDance, the parent company of TikTok, plans to allocate up to 150 billion yuan (approximately $20.64 billion) for capital expenditure this year, primarily aimed at enhancing its artificial intelligence capabilities. This information was disclosed by two informed sources to Reuters.
About half of this funding will be invested in overseas AI-related infrastructure, including data center resources and network equipment. ByteDance's spending will mainly benefit NVIDIA Corporation, which produces powerful GPUs required by many advanced AI models today, as well as Chinese chipmaker Cambricon Technology Co., Ltd. and network equipment supplier Huawei Technologies Co., Ltd.
Compared to the $7 billion budget reported by The Information last December, ByteDance's expenditure has significantly increased. However, it is worth noting that the earlier report specifically referred to ByteDance's budget for GPUs. In reality, ByteDance may not purchase a large number of GPUs but instead plans to lease these devices from data centers outside mainland China.
This leasing strategy is reasonable for ByteDance since, as a Chinese company, it faces strict restrictions when purchasing GPUs and other advanced AI accelerators from Western companies.
Although ByteDance is reportedly one of the largest purchasers of NVIDIA's H20 GPUs, these chips are customized versions designed for Chinese customers with reduced performance compared to the H100 GPUs.
Reuters noted that ByteDance's desire for more powerful AI processing capabilities makes it one of Microsoft's largest cloud computing resource clients in Asia. This significant investment aims to help ByteDance maintain its leading position in the domestic market. Despite entering the AI field officially only early last year, ByteDance has already established a competitive edge against rivals such as Baidu Inc. and Tencent Holdings Ltd., launching 15 independent AI applications.
The top AI application from ByteDance is the chatbot Duobao, similar to ChatGPT, with about 75 million users in China. Other applications include the text-to-video generator Jimeng, Xinghui for generating images based on textual prompts, Kouzi for developing customer service chatbots, and Maoxing providing emotional support to users.
Some of ByteDance's applications have also been launched in international markets. For example, Doubao is known as "Cici" internationally, while Jimeng is called "Dreamina."
Despite ByteDance's main competitors in China spending more on AI, the amount reported by Reuters is still far lower than many American companies. It is said that Google has a budget of $50 billion for AI infrastructure this fiscal year, while Microsoft stated it would spend $80 billion on AI this year.
On the other hand, ByteDance continues negotiations with U.S. authorities regarding TikTok's future in the United States. Last Monday, the new U.S. President signed an executive order postponing the execution period for banning U.S. infrastructure suppliers from cooperating with ByteDance by 75 days, but companies like Google and Apple remain uncertain about the outlook.
