ByteDance targets Alibaba cloud dominance with AI bet

The company behind TikTok is making a major play for China’s cloud computing market, hoping its artificial intelligence technology can help it branch out from the social media apps that built its fortune.

ByteDance has been rapidly growing Volcano Engine, the division that sells cloud services to businesses, by hiring more salespeople and offering lower prices than competitors in recent months. Workers at the company, along with clients and rival firms, say ByteDance is pitching corporate customers on tools that tap into its massive data collection and computer systems, including custom AI assistants built with its own technology.

Gaining ground in AI services

This approach is shaking up an industry worth billions that has traditionally been controlled by Alibaba, Tencent and Huawei. Volcano Engine now ranks as China’s number two provider of AI-related infrastructure and software, trailing only Alibaba, based on figures from IDC.

ByteDance captured nearly 13 percent of revenue from AI cloud services in China during the first six months of 2025, bringing in $390 million. Only Alibaba did better with 23 percent. Though ByteDance holds just around 3 percent of China’s total cloud market, experts say it’s gaining ground in AI services, the segment growing faster than any other.

“ByteDance’s growth trajectory and AI-led strategy suggest it could become one of the dominant players as demand for AI accelerates,” said Charlie Dai, vice-president and principal analyst at Forrester. “It has leveraged its wealth of data and large GPU infrastructure to develop AI tools for customers, combined with aggressive pricing and deep integration with its consumer ecosystem.”

ByteDance has built a solid reputation in consumer products, with TikTok and its Chinese equivalent Douyin, along with the CapCut video editing tool and Toutiao news app. Sales and advertising from these products still make up most of its income, which hit $50 billion in the third quarter of 2025, according to numbers shown to investors.

Earlier attempts to enter business software, including Lark, a product similar to Slack, haven’t resulted in significant revenue streams. ByteDance’s push into AI could help build excitement for a possible stock market debut, something investors have wanted for years.

ByteDance has been aggressively selling its AI technology through Volcano Engine. The company has concentrated on its main HiAgent product, which creates tailored AI assistants for business clients, according to staff members and potential customers.

The plan relies on massive spending on computing capability. ByteDance ranks among China’s biggest purchasers of AI equipment and was Nvidia’s largest Chinese customer in 2024. The Financial Times reported the company is setting aside Rmb85 billion for AI processors this year and wants to buy large amounts of Nvidia’s H200 chips if Chinese regulators approve access.

Rivals create opportunities

China’s major technology companies are creating openings for ByteDance to capture more of the market. Tencent has announced it’s focusing its GPU resources on internal projects instead of growing cloud services for outside clients. Huawei has pulled back its AI cloud plans over the past year, choosing to sell its Ascend chips directly to buyers instead. Both companies lost small portions of their AI cloud market presence in the first half of 2025, IDC data shows.

ByteDance’s emergence as a major AI player in China has received less global notice than companies like DeepSeek and Alibaba. Those competitors have released successful “open” models available for free while sharing research about their training approaches.

ByteDance has kept its most advanced models private, meaning businesses can only use them by paying for its cloud services. This tactic means ByteDance’s progress in large language models doesn’t get as much public attention, since open-source models face more examination from developers. A member of its LLM team called the company’s approach deliberately “low key” about its technical achievements.

“We are focused on training the best . . . models for our products and customers, not on the open-source race,” they said.

Sharpen your strategy with mentorship + daily ideas - 30 days free access to our trading program