Byte Dance’s plan to dominate AI

The Chinese company behind Tik Tok is pouring resources into artificial intelligence, but some investors and analysts think it is a big gamble as they question the sustainability of the technology’s boom.

Financial Times Europe30 Jul 2026By Zijing Wu and Eleanor Olcott

Dur ing the sum mer of 2023, inside a con ver ted brick ware house in down townShang hai, dozens of Byte Dance staff embarked on a secret mis sion.

The project had no name at the time and its engin eers only knew they were part ofthe “AI innov a tion” unit. Their first task was to build the Chinese com pany’s nextsuper app, an AI chat bot for the masses akin to OpenAI’s Chat GPT.

Byte Dance had once before broken the dom in ance of global tech giants with itsaddict ive short-video app Douyin, which later became Tik Tok in over seas mar kets.

The Shang hai unit spent two months build ing a pro to type chat bot, draw ing on vastcom put ing resources and exper i ence build ing con sumer applic a tions. Even tu ally,the pro to type became Doubao, which trans lates to “bean bun”. Two years on,Doubao is China’s most pop u lar AI app, with 324mn monthly users. It is now so ubi -quit ous that for some Chinese con sumers the word “doubao” has become syn onym -ous with AI itself.Yet Byte Dance founder Zhang Yim ing has big ger ambi tions. As well as design ingcon sumer-facing apps, Zhang wants Byte Dance to become China’s lead ing com panyacross all aspects of AI, from fron tier mod els and video gen er a tion to cloud infra -struc ture and cus tom chips — the com pon ents of what Nvidia founder JensenHuang has since called the “five-layered AI cake”.

Over the past three years, Byte Dance has accord ingly inves ted in AI more aggress -ively than any of the other Chinese tech giants, build ing out its net work of datacentres and hir ing research ers. It has doubled down on its cloud unit, Vol canoEngine, which sells AI solu tions to enter prises, and but tressed its video gen er a tioncap ab il it ies with its model Seedance. It also has ambi tions to develop a cus tom AIchip.

There is a broader, deep en ing investor optim ism about China’s advances in AI, par -tic u larly with the latest mod els from Moon shot AI and the block buster ini tial pub licoffer ing of memory-chip maker CXMT. The value of Byte Dance’s shares on the sec -ond ary mar ket has risen to up to $600bn, a 50 per cent jump from last year.

But investors and ana lysts say Byte Dance’s meta morph osis rep res ents a big gambleat a moment when some are ques tion ing the vast sums being spent on AI. Semi con -ductor stocks have plunged in recent weeks over con cerns about over sup ply andthe sus tain ab il ity of the AI boom.

Much like Meta in the US, Byte Dance has long con sidered itself a social media com -pany with a cash-spin ning plat form that sells con sumer atten tion to advert isers.The major ity of its $186bn in annual rev enue last year was from advert ising, with asmall but grow ing por tion from eco m merce.

Past devi ations from this core busi ness have not always worked out, includ ing pre -vi ous for ays into gam ing and edu ca tion tech no logy. Non ethe less, Byte Dance is nowplough ing pro ceeds into AI infra struc ture, hard ware and soft ware as it raisesmoney to expand into new areas such as chips.

“Over time, Byte Dance will look less like a social media com pany and more like anAI plat form com pany with con sumer dis tri bu tion at massive scale,” says CharlieDai, a tech ana lyst at con sultancy For res ter.

There are con sid er a tions bey ond cap ital expendit ure. Like other large tech com pan -ies oper at ing in a highly com pet it ive mar ket, includ ing Alibaba, Ten cent, Meta andGoogle, Byte Dance has struggled to retain top tal ent. It must also bal ance the twinpri or it ies of com mer cial isa tion and fron tier research.“Byte Dance is now spend ing pretty much every dol lar they make on AI, because it’sthe next big thing and they can’t afford to be left behind,” says an early investor inthe com pany who asked not to be named. “It’s a big bet.”

Four teen years ago, Byte Dance con sisted of a dozen or so staff in a Beijing apart -ment so small that if they stretched, they touched each other.

Shar ing a din ing table with his team in the liv ing room, Zhang wrote the first linesof code that later evolved into Byte Dance’s secret sauce of suc cess: algorithms thatmicro-ana lysed user beha viour and pre cisely pre dicted their real interest, keep ingthem hooked on apps. Zhang opted to keep headquar ters in an apart ment becauseBeijing’s office build ings typ ic ally shut down air con di tion ing sys tems at night, themost pro duct ive time for coders.

Not long after, Zhang con vinced an angel investor to put $80,000 into the start-up.The pitch meet ing took less than 10 minutes, accord ing to a per son with dir ectknow ledge, as the then 29year-old entre pren eur drew his idea on a nap kin. One ofits first suc cess ful products was a news aggreg ator called Toutiao, or “top head line”in Eng lish.

Two years later, Byte Dance’s valu ation exceeded $500mn. In 2016 it launched ashort video-shar ing plat form, Douyin, based on the same recom mend a tionalgorithm. A year later, Tik Tok, the inter na tional ver sion, was born.

The sur ging pop ular ity of Douyin and Tik Tok allowed Byte Dance to enter eco m -merce among other inter net ser vices. It became one of the most profi t able Chinesetech com pan ies, sur pass ing Alibaba and Ten cent in 2023.

Zhang, who became one of China’s richest people with wealth exceed ing $50bn,moved his team to fan cier and lar ger office build ings along the way. But with eachmove he cau tioned his team against “large cor por ate dis ease”, mean ing bur eau -cracy and polit ics.

“Byte Dance had and still has very much a do-er men tal ity — your work shouldspeak for you,” says one vet eran employee.

Fol low ing the release of OpenAI’s Chat GPT in late 2022, Zhang decided that Byte -Dance needed to build its own ver sion of a con sumer AI chat bot, assign ing the taskto the Shang hai unit. This was the first plank in a longer-term AI strategy.

In an effort to win over users, the unit added voice func tions so that chil dren andolder people who do not type can still inter act with the chat bot and may feel likethey are talk ing to a friend.To find a voice for its avatar, Doubao’s engin eers screened more than 100 voicesamples from men and women and ran tests over a month. They found that ayoung woman’s voice tested the best, giv ing rise to the car toon-style girl syn onym -ous with the Doubao app.

One per son involved in train ing Doubao says they chose a voice in keep ing with achar ac ter who is “gentle and sweet”. “We found that men do not want to inter actwith a voice that is too author it at ive,” they say.

The chat bot took off with users, becom ing the mar ket leader. “Doubao has becomepretty much just another word for AI in our fam ily,” says Jimmy Zhu, a 37-year-oldelec tric engin eer from Shang hai. “My seven-year-old son calls Doubao instead of uswhenever he has a ques tion, and my par ents in their sev en ties use Doubao for justabout everything — plan ning trips, ask ing what to do when they are not feel ingwell.”

Keen to build on this ini tial suc cess, Zhang, who closely fol lows the latest aca demicpapers and trends, decided in early 2024 that Byte Dance needed to strengthen itsresearch oper a tions and improve its model-train ing cap ab il it ies, accord ing topeople famil iar with his think ing.

This in turn would help improve the Doubao app, with mod els trained to deliverbet ter intel li gence while using fewer com put ing resources.

At the time, Byte Dance did have an AI research team, but it was dwarfed by lar gerrivals Alibaba and Baidu and was seen as peri pheral to the com pany.

Byte Dance for mu lated a plan to buy more Nvidia cards for AI train ing, while Zhangper son ally over saw a hir ing spree for top research tal ent.

Zhang’s res ol u tion hardened with Deep Seek’s launch of its open-sourced reas on ingmodel R1 in Janu ary 2025 — prov ing that a sin gu lar focus on AI research broughtbreak throughs that could be par layed into products.

“Deep Seek over took Doubao almost overnight in daily act ive users,” says a formerDoubao employee. “We built a great product with lots of func tions and nice userinter faces. Deep Seek had just one bor ing web page. It was dis heart en ing and awake-up call for us that no mat ter how good your product looks, the under ly ingmodel decides how smart it really is.”

Byte Dance acted quickly, hir ing Wu Yonghui, a senior sci ent ist from Google Deep -Mind, in Feb ru ary 2025 to lead its found a tion model team Seed.Wu expan ded his Seed team to its cur rent size of 2,000 — one of the largest ChineseAI labs — with some mem bers in Singa pore and Cali for nia but the bulk in China.The team includes core research ers, infra struc ture engin eers, a data labelling teamand trans lat ors.

“Byte Dance is hir ing aggress ively not only in China but also in Sil icon Val ley,” says aper son close to its San Fran cis co based team.

Retain ing these spe cial ists can be a chal lenge. When Byte Dance’s HR caught windthat a senior engin eer was being inter viewed by Alibaba, they hast ily arranged acall between him and Zhang and put an offer on the table the next day, accord ing toa per son with know ledge of the mat ter.

While Byte Dance has what insiders call a “high tal ent dens ity” in the Seed team, ithas still seen senior research ers depart to found start-ups, join fast grow ing AI labsor jump over to Ten cent — which raided its ranks last year.

One former Seed mem ber said that Ten cent was offer ing more respons ib il it ies in asmal ler team, and that Byte Dance had grown so large with over lap ping researchfunc tions that it was more com pet it ive to gain own er ship of projects.

US tech com pan ies includ ing Meta and Google have sim il arly seen tal ent drainaway to Anthropic and OpenAI, as research ers and engin eers bet they can do moreimpact ful work in a fast-mov ing start-up as well as pick ing up stock.

Zhang stepped down as Byte Dance CEO in 2021, but remains deeply involved in thecom pany’s strategy, espe cially in AI. He per son ally spends a lot of time with theSeed team, get ting into tech nical dis cus sions with its engin eers, accord ing to mul -tiple former and cur rent employ ees. “He is mod est and asks good ques tions,” saysone of them.

The most ambi tious plank of Byte Dance’s AI strategy is its pivot to selling AI solu -tions to com pan ies and organ isa tions through Vol cano Engine. Byte Dance has pre -vi ously tried to launch enter prise-focused busi nesses, not ably with Lark, itsinternal com mu nic a tion and col lab or a tion tool. But it has not reached the samescale and suc cess as its con sumer apps.

Foun ded in 2020, Byte Dance’s cloud unit Vol cano Engine was a new entrant in analready sat ur ated mar ket where Ten cent, Baidu, Hua wei and Alibaba all offer busi -ness ser vices, in addi tion to state-owned cloud com pan ies such as China Mobile.Byte Dance has gained mar ket share by offer ing cut-throat pri cing on its fleet ofproducts and mod els.Its most com pet it ive offer ing is Seedance 2.0, which it sells to advert ising agen cies,media groups and AI con tent cre at ors. The product has been praised by users for itshigh-qual ity cine matic shots with com plex fram ing and easyto-use edit ing cap ab il it -ies.

Byte Dance faces com pet i tion in video gen er a tion from Alibaba and Kling, owned byKuaishou, another shortvideo com pany in China. But ana lysts say the com pany hasan edge that is diffi  cult for other com pan ies to rep lic ate.

Train ing video AI mod els requires vast amounts of high-qual ity foot age, data thatByte Dance has in abund ance through its own er ship of short-video apps such as Tik -Tok. Since video con tent, unlike text, can not eas ily be scraped at scale, it is diffi  cultfor com pet it ors to catch up.

Sales of the Seedance model to media com pan ies rep res ent a sig ni fic ant por tion ofVol cano Engine’s over all rev en ues, accord ing to people famil iar with the mat ter.

Des pite its rel at ive inex per i ence in cloud, Byte Dance has become China’s second-largest pro vider of AI infra struc ture and soft ware, accord ing to mar ket intel li gencefirm IDC. Byte Dance accoun ted for 16 per cent of China’s AI cloud ser vices rev enue,which totalled $1bn in 2025, behind only Alibaba. However, Vol cano Engine’s shareof the over all cloud mar ket in China is less than 5 per cent.

A key advant age Vol cano Engine has over other Chinese cloud pro viders is its abil -ity to expand over seas, lever aging Byte Dance’s oper a tional knowhow in more than100 coun tries gathered from the past dec ade.

Byte Dance has, for example, a ded ic ated team that is work ing with data centreoper at ors to build new facil it ies in Malay sia, Singa pore, Brazil, Ire land and Nor way.This infra struc ture will not only sup port Byte Dance’s busi nesses on the ground butalso provide cloud and model ser vices to local cli ents, accord ing to a per son withknow ledge of the plans.

Yet some ques tion whether Byte Dance can broaden its cloud sales bey ond the sec -tors it is most famil iar with, such as media. In fin ance and tech, Alibaba still has theupper hand, ana lysts say. Byte Dance’s mod els have also lagged behind in AI cod ing— an area that it has pri or it ised to improve given the boom ing enter prise demandfor cod ing tools.

“Byte Dance doesn’t have as much industry knowhow com pared to AliCloud, whichfor over 15 years has served a wide range of enter prise cus tom ers,” says EdisonLee, head of China tech research at invest ment bank Jef fer ies. “Byte Dance has beenlower ing prices to gain mar ket share, but this strategy doesn’t work for large enter -prises who aren’t just motiv ated by prices.”

Another bot tle neck for all Chinese AI com pan ies is the lack of advanced com put ingpower in the coun try.

Doubao’s pop ular ity demon strates the poten tial demand. But the more users the AIapp has, the more com put ing power is needed, which is expens ive and increas inglyscarce in China due to US export con trols. Doubao’s daily token con sump tion hasreached about 120tn, one of the highest glob ally among con sumer AI apps.

Byte Dance is the best-posi tioned tech giant in China in terms of its raw com put ingcapa city, hav ing been an early and aggress ive pur chaser of Nvidia chips as well asdomestic infer ence chips from Cam bricon, say industry insiders.

The com pany is pur su ing a “port fo lio strategy”, says ana lyst Poe Zhao, as it seeksdiverse AI chips from mul tiple sources, both inside China and over seas. Byte Danceis a lead ing ten ant in the rap idly grow ing net work of data centres being built inMalay sia and Singa pore. It is also design ing its own AI chip for internal infer encework loads.

Whether Byte Dance’s auda cious trans form a tion suc ceeds may ulti mately dependon whether it can secure enough com put ing resources. US export con trols, whichcould be tightened, com plic ate the pic ture.

“That is the con straint that binds everything else,” Zhao