ByteDance, the company behind TikTok, is exploring a new strategy to bypass U.S. sanctions, investing $7 billion in advanced Nvidia processors. This move could make ByteDance one of the largest global consumers of AI hardware. But what’s driving this significant investment?
Like other Chinese firms, ByteDance is unable to directly purchase the latest graphics processing units (GPUs) from Nvidia or install them in its data centers located in China. However, ByteDance has come up with an innovative workaround. The company plans to buy these processors and use them in data centers located in countries that are not under U.S. sanctions, as reported by The Information. In addition, ByteDance intends to invest up to $7 billion in Nvidia’s processors over the next year, although ByteDance has denied the claims.
Massive Investment in AI Infrastructure
ByteDance is not only investing in processors. According to the report, the company is set to spend over $20 billion on AI infrastructure. Of that, $7 billion will go toward the processors, while the remainder will be allocated to building data centers and even undersea cables—a monumental investment in its own right.
Although the U.S. has banned ByteDance from directly acquiring advanced processors or using American cloud services, it cannot prevent the company from using cloud services in other regions, such as the Middle East and Asia. This strategy would allow ByteDance to sidestep U.S. sanctions and avoid friction with Washington.
If ByteDance proceeds with this plan and invests $7 billion in acquiring access to Nvidia’s processors, it will become one of the world’s largest consumers of AI hardware. To put this into perspective, renting an Nvidia H100 processor in the U.S. costs about $1.33 per hour. With $7 billion, ByteDance could rent 614,682 H100 processors running around the clock for an entire year.
However, it’s unclear whether there are enough H100 processors available for rent in Asia or the Middle East, and it’s also uncertain whether ByteDance requires such a large-scale setup for its AI projects. For example, the company’s biggest AI initiative, Doubao—an AI chatbot with 51 million active users—does not need this much infrastructure.
Some industry experts speculate that ByteDance might spend less than reported on AI cloud infrastructure or, conversely, that the company may expand its AI projects significantly. Another possibility is that ByteDance could continue purchasing less advanced Nvidia processors for its Chinese data centers, a move that the U.S. permits.
Developing Its Own AI Processors
In addition to relying on Nvidia, ByteDance is reportedly collaborating with Broadcom to develop its own AI processors. While these processors may not be able to compete with Nvidia’s chips due to export restrictions, developing its own hardware could significantly lower ByteDance’s costs.
Why Does This Matter?
ByteDance is primarily known as the parent company of TikTok, which has recently gained attention in the U.S. due to potential legislation that could ban the app unless ByteDance sells it to a Western company.
AI algorithms are at the heart of TikTok’s success. The app’s recommendation system, which serves personalized content to users, relies heavily on advanced AI technology. Additional investment in this area is expected to improve TikTok’s performance, helping the company to identify trends and enhance user experiences. This would likely result in increased user engagement and longer time spent on the platform.
At the same time, ByteDance faces intense global competition from tech giants such as Google, Meta, and OpenAI. To stay competitive, ByteDance is investing heavily in AI for various applications, including chatbots, AI-powered education tools, and automated content creation. These initiatives require sophisticated AI infrastructure capable of processing massive amounts of data.
Additionally, AI is a key driver of ByteDance’s monetization strategy. By offering more effective ad targeting based on user data analysis, ByteDance can boost its revenue.
Furthermore, ByteDance is also facing competition within China. Alongside global rivals, the company is up against major Chinese players like Alibaba, Baidu, and Tencent. Investment in AI helps ByteDance maintain its edge in the Chinese market, where innovation is highly valued by both consumers and the government.
