ByteDance's $7 Billion Overseas Nvidia Chip Purchase Aims for Global AI Leadership

ByteDance's $7 Billion Overseas Nvidia Chip Purchase Aims for Global AI LeadershipNews broke on December 31st that despite US government efforts to restrict Chinese companies from accessing advanced AI chips, ByteDance continues to utilize Nvidia's top-tier products and plans massive future investment, challenging the global AI giants. Sources say ByteDance recently informed its suppliers of a plan to spend up to $7 billion overseas on Nvidia chips by 2025

ByteDance's $7 Billion Overseas Nvidia Chip Purchase Aims for Global AI Leadership

News broke on December 31st that despite US government efforts to restrict Chinese companies from accessing advanced AI chips, ByteDance continues to utilize Nvidia's top-tier products and plans massive future investment, challenging the global AI giants. Sources say ByteDance recently informed its suppliers of a plan to spend up to $7 billion overseas on Nvidia chips by 2025. This ambitious project, spearheaded by ByteDance co-founder Zhang Yiming, signals the company's intent to become a leading global purchaser of high-end hardware, demonstrating remarkable determination.

ByteDance cleverly exploits loopholes in US export controls by deploying Nvidias Hopper AI chipsrestricted for export to Chinain overseas data centers. Sources reveal Zhang Yiming has engaged in intensive negotiations with data center operators in Southeast Asia and other regions, aiming to be among the first to utilize Nvidias next-generation Blackwell chips upon their release. This not only highlights the challenges faced by the Biden administration in cutting off Chinas access to crucial AI hardware but also underscores Zhang Yiming's ambition to establish ByteDance as a global AI leader rivaling Meta, a strategy unwavering even amidst the threat of a TikTok ban in the US.

However, the US government plans further tightening of policies, drafting new regulations to restrict exports of advanced AI chips to Southeast Asia and the Middle East, potentially impacting ByteDance's plans. Since its late 2022 release, the Hopper chip's powerful performance has made it highly sought after by AI developers like OpenAI, Anthropic, and ByteDance, leading to severe supply constraints. The AI industrys surging demand for chip clusters to train and run large language models fuels anticipation for the upcoming mass rollout of Blackwell chips.

Massive Capital Expenditure Underscores AI Ambitions

Zhang Yiming personally participated in numerous negotiations with AI data center suppliers responsible for leasing or constructing facilities. He made it clear that ByteDance's capital investment in AI hardware, land, and construction over the next two years will surpass other Chinese tech giants. A participant in these negotiations stated that Zhang Yiming emphasized his personal oversight of these development projects to ensure sufficient computing resources for training and running AI models. Notably, even US AI developers like OpenAI sometimes face server resource limitations.

Similar to Meta, ByteDance was reportedly stunned by OpenAI's breakthroughs in conversational AI models two years ago, which underpin ChatGPT. ByteDance has been diligently developing its own models and applications, including video generation tools. Currently, it operates "Doubao," China's most active AI chatbot application with ChatGPT-like capabilities. According to AI product tracker Aicpb.com, Doubao attracted 60 million monthly active users last month, while ChatGPT boasts 300 million weekly users across web and mobile. ByteDance is also developing different versions of AI products for overseas markets.

$20 Billion Investment Plan Targets Global AI Dominance

Sourcesone collaborating with ByteDance and another involved in financing these projectsreveal ByteDance has informed data center suppliers and banks of a plan to invest over $20 billion next year in AI chips, data centers, and other hardware (such as undersea cables). However, both sources noted that the 2025 budget is not yet finalized. Approximately $7 billion of this is earmarked for overseas cloud services procurement to access Nvidia's AI chips.

This investment scale rivals that of global tech giants. For example, Google has reportedly ordered over 400,000 GB200 chips (part of the upcoming Blackwell series), with the total cost, including server hardware, estimated to exceed $10 billion. Similarly, Meta has placed large orders, with the total cost of GB200 chips and related server hardware reaching at least $10 billion.

TikTok's Billion-User Base Fuels AI Investment

Compared to giants like Meta, Chinese companies' spending on AI hardware remains relatively low. Meta's revenue is comparable to ByteDance's, but its capital expenditure this year (covering data centers and servers) is projected to reach $38-40 billion, representing a quarter of its estimated revenue. A source collaborating with ByteDance in the data center sector revealed that ByteDances leadership would not hesitate to match increased spending by competitors.

ByteDance has become a significant customer for numerous global data center operators, who are planning new facilities in Southeast Asia and Europe to meet the strong demand for AI computing from Chinese tech giants over the next decade. TikTok's over one billion monthly active users globally provide a strong foundation for its AI investments.

For instance, ByteDance is one of the largest clients of GDS Holdings, a Bain Capital-backed data center operator headquartered in China. Sources indicate GDS is pursuing a $3 billion plan to build new data centers in Malaysia primarily serving TikTok. GDS Holdings did not respond to requests for comment. Additionally, sources say several European data center operators are exploring new facility construction projects, with ByteDance as a primary client. Negotiations with European data center operators are part of ByteDances plan to store TikTok user data from Europe locally.

ByteDances massive investment demonstrates its determination and capacity to enter the global AI market. The future will show whether ByteDance, leveraging its substantial capital and vast user base, can become a leading global AI company. This is not only crucial for ByteDance's future but also impacts the evolution of the global AI industry landscape. Its global footprint and pursuit of advanced technology will profoundly influence future AI competition. While US export control policies aim to curb the rise of Chinese tech companies, ByteDance's bold actions challenge these restrictions and add significant variables to the future development of the global AI industry.