According to Fortune, a U.S. consortium is set to take over TikTok’s U.S. arm, likely before a January 23 deadline, with ByteDance retaining a less than 20% stake. The deal, endorsed by the U.S. but met with a tepid response from Beijing, could see the new entity pay up to half of its profits back to ByteDance as a licensing fee. The Chinese parent company, which reportedly earned $33 billion in profit last year on $155 billion in revenue, is now heavily investing in AI. Its Doubao chatbot has 157 million monthly active users in China, and the company is the largest reported purchaser of Nvidia chips within the country. ByteDance is also offering its basic AI model at a cut-rate 2.6 yuan (37 cents) per million tokens to undercut rivals like DeepSeek.
The real prize isn’t TikTok
Here’s the thing: selling TikTok’s U.S. operations, or licensing them out, solves a massive political headache for ByteDance. But it also potentially frees up a ton of capital and executive focus. We’re talking about a company that might get a $14 billion sale price plus a huge, ongoing revenue stream from licensing its core algorithm. That’s war chest money. And all signs point to them funneling that straight into the AI arms race.
So while the headlines are about Trump, Xi, and divestment, the quieter, more strategic battle is happening in data centers and research labs. ByteDance is reportedly earmarking over $20 billion for capital expenditures in 2025, much of that for AI chips and infrastructure. They’re not just playing in the consumer chatbot space with Doubao; they’re pushing hard on visual and image generation, integrating AI directly into TikTok and CapCut. That’s where they think they can win.
An AI strategy built on price and patience
ByteDance entered the LLM game late, but they’re attacking it with a specific playbook. First, compete ruthlessly on price. Undercutting DeepSeek by a few cents per million tokens might not sound like much, but at scale, it’s a brutal way to grab market share and enterprise clients through their Volcano Engine platform. Second, focus on your strength. As analyst Grace Shao notes, their edge isn’t in pure text models—it’s in visual stuff. Winning a NeurIPS award for efficient image generation proves they have the research chops.
And third, be patient. “ByteDance is not a company that hypes themselves up a lot in the beginning,” Shao says. They tend to build quietly and launch when a product is mature. This is a long game. They’re up against giants like Alibaba, which pledged $50 billion for AI, and surprise challengers like DeepSeek, which was a “wake-up call for China” about complacency. ByteDance’s private status means they can’t just tap public markets for cash like their rivals can. That makes the TikTok deal money even more critical.
What this means for everyone else
For users, the TikTok experience might not change dramatically—the algorithm, the secret sauce, may still be owned and updated by ByteDance, just licensed. For developers and businesses, ByteDance’s aggressive pricing is a gift. It drives down the cost of AI inference for everyone and forces other model providers to compete. It also means more powerful, easy-to-use AI tools are coming directly into content creation apps like CapCut, lowering the barrier for making slick videos.
But the bigger market impact is about focus. Solving the U.S. problem potentially unlocks ByteDance’s long-delayed IPO. It transforms them from a “social media company with a geopolitical problem” into a ” diversified AI and tech giant.” That’s a much more attractive story for investors. It also lets them fully engage in the global AI race, building data centers in Latin America and Southeast Asia, beyond the reach of the most restrictive trade policies.
Survive and maybe thrive
Look, getting forced to sell your most famous asset in your most lucrative market seems like a disaster. And in the short term, it’s a huge blow. But ByteDance has been preparing for this for years. They’ve built a financial powerhouse with massive profits from ads and commerce. Now, they’re pivoting that engine toward the next big thing.
The TikTok saga might ultimately be remembered not as ByteDance’s downfall, but as the moment it was forced to evolve. Instead of being *just* the TikTok company, it’s betting billions to become an AI infrastructure and services company. They have the data, the engineering talent, and if this deal goes through, they’ll have the capital and the political clearance to go all in. The quiet lead in AI they’ve built isn’t just a backup plan—it might be the main event.
