TikTok-owner ByteDance takes early lead in race to capitalise on AI

TikTok-owner ByteDance has emerged as an early frontrunner in the race to capitalise on generative artificial intelligence in China, poaching top talent from local rivals and becoming Nvidia’s biggest customer in the country.  

The Beijing-based company has lured top AI engineers and researchers away from Alibaba and start-ups such as 01.ai and Zhipu in recent months, according to multiple people with knowledge of the hiring spree. It has also created and expanded teams to work on its large language models and AI products. 

ByteDance is ploughing billions of dollars into AI infrastructure. In the past two years, it has purchased enough cutting-edge Nvidia graphics processing units to build advanced AI models, according to multiple people familiar with the matter.

The effort, led by Zhang Yiming, ByteDance founder and China’s richest man, comes as critical moment. While the private company was valued at around $300bn in a recent share buyback programme for investors, growth for Douyin, the local sister app to TikTok, has hit a saturation point in China.

Meanwhile, there are also signs growth has slowed for TikTok in key markets. In another blow, a US court on Friday upheld a law that requires ByteDance to sell the platform by January or face a ban in the country.

“[Zhang] Yiming realised the potential for large language models to change the industry, and he decided to go all in,” said one company insider.

Key to its AI expansion is its close commercial relationship to Nvidia. ByteDance can only buy Nvidia’s H20s for Chinese data centres, a specialised and less-powerful version of its GPUs tailored to align with US export controls.

But ByteDance can buy top-of-the-range H100s and Blackwell chips for data centres outside of the country. That has led ByteDance to increase its computing capacity outside China, including signing on as the anchor tenant for new data centres in Malaysia.

People with knowledge of the matter said ByteDance is already Nvidia’s largest customer in China, with one of these people adding it has become the company’s biggest buyer in Asia.

Tan Dai, the chief of Volcano Engine, ByteDance’s cloud computing arm, had an audience with Nvidia chief Jensen Huang in California earlier this year, underscoring the importance of the company to sales in Asia, one of these people said.

ByteDance and Nvidia declined to comment.

The release of OpenAI’s chatbot galvanised a race by Chinese tech giants, including Baidu, Alibaba and Tencent, into generative AI — in what had previously been an under-developed field in China. 

While there is no definitive frontrunner in China’s efforts to develop the most advanced LLM, ByteDance, alongside rivals DeepSeek and Alibaba, has been pushing out more capable models and slashing costs for developers.

But ByteDance has secured the lead in developing China’s most popular AI app, with its AI chatbot Doubao emerging as the best challenger to ChatGPT in China. It released Doubao in August 2023, five months after Baidu’s Ernie Bot, but has since become the country’s most popular AI application, according to website analytics site Aicpb.com.

By November, Doubao had 60mn regular monthly active mobile users, compared to nearly 13mn for Wenxiaoyan, the rebranded mobile version of Baidu’s Ernie Bot. However, OpenAI said it has 300mn weekly active users globally.

“The key differentiator of ByteDance’s Doubao is that it brings together multiple AI capabilities in one polished application,” said Wang Tiezhen, an engineer at machine learning platform Hugging Face, pointing to the chatbot’s search, translation, image and video generation capabilities.

ByteDance has also launched an overseas chatbot, Cici AI, which is powered by third party models including OpenAI’s GPT.

Zhang, who stepped back as chief executive in 2021, has remained active in the group’s AI strategy, according to multiple company insiders.

He has personally overseen the hiring of Chinese AI engineers and researchers from rival companies, these people said. The billionaire has spoken internally of his aim of “artificial general intelligence”, systems with humanlike intelligence.

“[Zhang] Yiming is hyper-focused on achieving AGI,” said one company insider in a reference to “artificial general intelligence, or when computer software surpasses human cognitive abilities. Another person close to Zhang said he is reluctant for ByteDance to be seen as an AI company, given the risk of courting increased scrutiny from Washington.

Some industry insiders are sceptical of the goal after the company made several failed big bets on future technological development. He previously made huge investments in gaming, virtual reality and online education, all of which ByteDance ploughed billions of dollars into, only to shut down or sell off their investments.

“This is not the first time [Zhang] Yiming has bet big on the next technology,” said one executive at a rival AI company in China. “We’ll see how long this bet lasts.”

ByteDance also has a team working on an AI chip after poaching leading talent from rival Chinese chip firms.

The team is building an AI accelerator application-specific integrated circuit (ASIC) — a specialised AI chip for machine learning, according to people familiar with the matter. 

Its efforts are modelled on Google’s Tensor Processing Unit, a self-developed ASIC that the internet giant hopes will wean its dependence on Nvidia chips for AI training and inference. Reuters and The Information have previously reported about ByteDance’s AI chip effort.

In 2017, ByteDance built an AI lab that brought in leaders from Microsoft Research Asia, the leading research facility in China at the time. ByteDance’s lab included a team working on LLMs, according to two people familiar with the matter.

“There was no clear pathway for the technology at the time, and the project was shut down,” said one executive.

ByteDance has since pursued strategies for model development to align with US and Chinese restrictions, according to a person with direct knowledge of the matter. It has trained separate models — one for the Chinese market called Doubao and another targeting overseas, called Cici — based on the same algorithm but using different data sets. 

Nevertheless, there are overlaps. Zhu Wenjia, the tech executive behind the recommendation algorithm that powered ByteDance’s first breakout product, the news aggregator Toutiao — has been put in charge of its AI model development.

Both the overseas and Chinese members of the so-called “Seed Team” working on model development report to Zhu, while there are researchers in the US that work alongside colleagues in Singapore and Beijing on its models, according to people familiar with the matter. 

Furthermore, the team in Beijing can remotely monitor and control the Cici model training progress outside of China. 

“[Zhang] Yiming can see that ByteDance needs a new growth engine after Douyin and TikTok,” said one person close to Zhang. “He is always thinking about what is coming in the next five years, what can extend the company’s future.”

Additional reporting by Wenjie Ding in Beijing