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ByteDance is making an aggressive push into China’s cloud market, as the TikTok owner seeks to use its AI advances to diversify beyond the consumer apps that have powered its rise.
The Beijing-based group has rapidly expanded Volcano Engine, its corporate cloud offering, through increasing the sales team and undercutting rivals on price in recent months, according to company employees, customers and competitors.
These people said ByteDance has been pitching to corporate clients on products that draw on its vast data reserves and computing infrastructure, such as through building bespoke AI agents using its proprietary models.
The strategy is disrupting a multibillion-dollar industry that has been long dominated by Alibaba, Tencent and Huawei.
Volcano Engine has become China’s second-largest provider of AI infrastructure and software, behind Alibaba, according to IDC. ByteDance accounted for nearly 13 per cent of China’s AI cloud services revenue, worth $390mn in the first half of 2025, behind only Alibaba which had 23 per cent.
While its share of the overall cloud market in China is only around 3 per cent, analysts said it is gaining an edge in AI services, which represent the fastest-growing segment of the market.
“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 a strong record in consumer technology, with products including TikTok and its Chinese sister app Douyin, video editor CapCut and news aggregator Toutiao.
Sales and advertising through those still represent the vast majority of its revenues, which totalled $50bn in the third quarter of 2025, according to financial figures shared with investors.
Past efforts to break into enterprise software, including through its Slack-like product Lark, have failed to result in large business lines. ByteDance’s AI growth strategy could help galvanise momentum for a potential future initial public offering, which investors have been seeking for several years.
ByteDance has been aggressively commercialising its AI capabilities through Volcano Engine. It has focused on selling its flagship HiAgent offering, through which it builds custom AI agents for corporate customers, according to employees and prospective customers.
The strategy is underpinned by heavy investment in computing power. ByteDance is among China’s largest buyers of AI hardware and was Nvidia’s biggest customer in the country in 2024.
The FT reported that it is budgeting Rmb85bn for AI processors this year and is planning on purchasing significant quantities of Nvidia’s H200 chips if the Chinese authorities greenlight its access.
“ByteDance has strong software capabilities and sufficient hardware resources to gain market share,” said Edison Lee, head of China tech analysis at Jefferies.
“But it lacks deep industry expertise and experience serving enterprise customers in many different industries. It is playing catch-up and winning share from Tencent and Huawei.”
China’s Big Tech players are providing an opportunity for ByteDance to further win market share. Tencent has said it is prioritising its GPU resources for internal use rather than expanding cloud services for external customers.
Huawei, meanwhile, has scaled back its AI cloud ambitions over the past year, focusing on selling its Ascend chips directly to clients. Both companies saw their AI cloud market shares slip slightly in the first half of 2025, according to IDC.
ByteDance’s rise as one of China’s AI giants has captured less international attention than groups such as DeepSeek and Alibaba. Those rivals have launched successful “open” models that are free to access, while also publishing research on their training methods.
By contrast, ByteDance has kept some of its most advanced models proprietary, meaning that companies only have access to them through its cloud business. Alibaba, a vocal advocate of China’s open-source strategy, has in recent months kept some of its leading models “closed”.
This strategy has meant ByteDance’s advances in LLMs are not as broadly publicised, as performance of open-source models gains more scrutiny from developers.
One member of its LLM team described the company’s approach as deliberately “low key” about its technological progress. “We are focused on training the best . . . models for our products and customers, not on the open-source race,” they said.
ByteDance did not respond for a request for comment.
Additional reporting by Ryan McMorrow in Beijing
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