TikTok owner expands cloud AI services business. What does this mean for Alibaba?

Chinese tech giant ByteDance, owner of TikTok, is aggressively moving into China's cloud services market, Financial Time (FT) writes. The company is looking to use its advances in artificial intelligence to diversify its business beyond the consumer applications that have fueled ByteDance's growth, the newspaper notes. ByteDance's strategy to develop enterprise cloud AI solutions could "undermine" the established balance in the multi-billion dollar market, which has long been controlled by Alibaba, Tencent and Huawei, the publication points out.

Beijing-based ByteDance has been working hard in recent months to expand its enterprise cloud business Volcano Engine, unnamed employees, customers and competitors of the company have told the FT. The publication's sources said Volcano Engine is increasing its sales team and lowering the prices of its services compared to those of competitors.

The publication's sources also note that ByteDance offers enterprise customers solutions that rely on its extensive data sets and computing infrastructure, including the creation of customized AI agents based on the company's proprietary models.

ByteDance did not respond to the newspaper's request for comment.

According to data from IDC, an international analytics company specializing in technology market research, Volcano Engine has become the second-largest AI infrastructure and software provider in China - after Alibaba: in the first half of 2025, ByteDance accounted for almost 13% of revenue in China's $390 million cloud AI services market, while Alibaba's share was 23%, writes the Financial Times.

Meanwhile, despite ByteDance's relatively small share of the entire Chinese cloud services market - around 3% - analysts note that the company is strengthening its position specifically in the AI services segment, which is the fastest growing segment in the market. "ByteDance's growth trajectory and AI-driven strategy indicate that the company could become one of the dominant players as demand for AI increases," Charlie Dai, vice president and lead analyst at Forrester, remarked in comments to the FT.

These ambitions are backed up by investment: according to the FT, the company is budgeting 85 billion yuan ($12.2 billion) to buy AI processors this year and plans to buy significant quantities of Nvidia H200 chips - subject to Chinese authorities approving the deal.

At the same time, ByteDance's emergence in the Chinese cloud market as a key player has so far attracted less attention than the successes of companies such as DeepSeek and Alibaba, the FT points out. These companies, the newspaper explains, have relied on "open" solution models available for free and are actively publishing research on how to train them.

In contrast, ByteDance keeps some of its most advanced models closed, giving companies access to them exclusively through its own cloud direction. Notably, Alibaba - one of the most active supporters of China's open-source strategy - has also left some of its leading models "closed" in recent months, the newspaper points out.

"ByteDance has strong software competencies and sufficient hardware resources to gain market share," said Edison Li, head of China technology sector analytics at Jefferies. - However, the company lacks deep industry expertise and experience in working with enterprise customers across sectors." "ByteDance is now catching up with competitors and taking share away from Tencent and Huawei," he added.

ByteDance currently has a strong position in consumer technology, the Financial Times points out: the company's portfolio includes TikTok and its Chinese version Douyin, video editor CapCut, and news aggregator Toutiao. Sales and advertising revenue from these services continue to form the bulk of the company's revenue, which, according to the latest financial data, amounted to $50 billion in the third quarter of 2025.

This article was AI-translated and verified by a human editor