ByteDance is Winning the China AI Race. That’s Bad News for TikTok.

For political reasons, TikTok would probably just as soon recede into a hedge right now like Homer Simpson, but its parent company is making a big splash in AI land.

ByteDance, the China-based TikTok owner and political punching bag for successive US administrations, is apparently emerging as the nation’s answer to OpenAI. According to a Financial Times report, ByteDance is pulling ahead in the Chinese generative AI market, ordering the most chips from Nvidia of any Chinese firm. If ByteDance emerges as a clear frontrunner in the AI arms race, that could expose it to a new level of geopolitical scrutiny and heighten threats to the future of its beloved subsidiary TikTok. 

The AI Dominance Challenge

China’s tech scene has long been a mirror-image of the one in the US. The so-called Great Firewall kept out the vast majority of US tech companies, so China developed its own tech giants to cater to its 1.4-billion strong population. The same holds true for its AI market — OpenAI’s ChatGPT is banned in China, and domestic tech giants including Alibaba, Baidu, and Tencent have pitched into the generative AI hype cycle. This time, though, it’s not just China trying to freeze out US businesses. The US has pursued an aggressive AI policy against China, implementing trade restrictions on semiconductors.

As the US heads into the next Trump administration, the president-elect has signaled that he won’t ease up on that front of the US-China trade war. Trump also promised on the campaign trail, however, that he would save TikTok and as president, he would have considerable power to support the app even after President Biden’s ban was upheld by an appeals court earlier this month. But if ByteDance’s AI star rises too high, that could put TikTok back in the sights of the Trump admin 2.0:

• Sources told the FT that ByteDance has been on an AI hiring spree, attracting AI talent from other Chinese tech giants and startups. One source told the FT that ByteDance CEO Zhang Yiming decided to go “all in” on large language models (LLMs).
• Per the FT, ByteDance’s ChatGPT-esque app Doubao had 60 million monthly active users on mobile as of November, the most of any such app in China. For comparison, OpenAI boasts 300 million weekly active users.

An AI Company by Any Other Name: One source told the FT that although Yiming is chasing after AI, he’s concerned about ByteDance being perceived as an AI company specifically because of the heat it could catch from Washington as a result. Trump already changed his mind once about TikTok, having proposed a ban on the app during his first term, so there’s a non-zero chance of him reverting to his previous dislike.