ByteDance Capex Dwarfs Chinese Rivals In AI Spending Boom

Privately held TikTok parent company ByteDance invested an estimated 80 billion yuan ($11bn, £8bn) in technologies including artificial intelligence this year, nearly matching the combined spending of competitors Baidu, Alibaba Group Holding and Tencent Holdings, according to new research.

China’s biggest tech companies ramped up capital expenditures this year as they sought to build out infrastructure for large language model-powered chatbots and other generative AI tools.

Baidu, Alibaba and Tencent spent a combined 100bn yuan on capital outlays, according to Zheshang Securities analysts.

ByteDance is expected to double its capital spending to 160bn yuan in 2025, with 90bn yuan spent on computing power and the rest spent on infrastructure including data centres, the Zheshang report said.

AI infrastructure

Chinese tech firms’ capital expenditures remain well below those of their US counterparts, with Microsoft alone spending $44.5bn on capex this year, according to the Zheshang note.

The firm said ByteDance’s Doubao AI chatbot has achieved metrics comparable to OpenAI’s GPT-4o for reasoning, coding, ability to follow instructions and overall ability.

ByteDance’s model is also far less costly to operate, costing 0.003 yuan per thousand token uses, compared to 0.0175 yuan for ChatGPT, according to figures provided by ByteDance and cited by securities analysts.

Generative AI requires hugely powerful data centres to train and operate the LLMs that power tools such as chatbots.

ByteDance has also invested heavily in promoting its range of AI products this year, including 124m yuan to advertise Doubao in the first 10 days of June, up from 18m yuan for the two-month period of April and May.

Doubao has become China’s most popular chatbot since its launch in May, with nearly 60 million users by November, making it the world’s second most popular chatbot after ChatGPT according to figures from Aicpb.com.

Popularity

The free app’s popularity has given ByteDance access to huge amounts of user data that can be used to further train the model, also allowing the company to improve the recommendation algorithms for short-video platform Douyin, the Chinese equivalent of TikTok, and news app Jinri Toutiao, Zheshang said.

ByteDance also offers AI-powered video, image and music generation as well as video editing.

In the first half of 2024 China’s tech giants doubled their capital spending compared to the same period a year earlier, with the focus on AI processors and infrastructure, the Financial Times reported in August.

ByteDance, backed by a cash reserve of $50bn, was estimated to have bought hundreds of thousands of Nvidia’s H20 AI accelerator chips that were designed to comply with US export restrictions to China, Dylan Patel of chip research group SemiAnalysis told the FT.

The company is building AI data centres in China as well as Johor, Malaysia, and is also buying capacity from US clouds, Patel said.