ByteDance is preparing to spend about 100 billion yuan ($14 billion) on artificial intelligence chips from Nvidia in 2026, a sharp increase from roughly 85 billion yuan this year, according to people familiar with the matter who spoke to SCMP.

The proposed spending, which underscores both the scale of its AI ambitions and the strategic importance of access to U.S. chip technology, hinges on whether Nvidia is ultimately allowed to sell its H200 graphics processing units to Chinese customers, a decision that remains subject to regulatory approval in Beijing despite Washington recently easing restrictions on the chip.

The budget, sources cautioned, could still change depending on policy outcomes and market conditions.

The planned outlay forms part of ByteDance’s broader push to dramatically expand capital expenditure on artificial intelligence next year. The Beijing-based company, which is privately valued at about $500 billion, is preparing to lift total AI investment to as much as 160 billion yuan in 2026, according to a Financial Times report earlier this month.

At the heart of the strategy is ByteDance’s surging demand for computing power across its sprawling ecosystem, which includes TikTok and Douyin, its rapidly growing cloud business Volcano Engine, and its expanding suite of large language models.

Volcano Engine, ByteDance’s enterprise cloud arm, is set to become the exclusive AI cloud partner for China Central Television’s Spring Festival Gala, the most-watched television broadcast in the country. The partnership highlights how deeply embedded ByteDance’s infrastructure has become in high-profile national platforms, further intensifying its need for reliable, large-scale AI compute.

The company’s chatbot, Doubao, illustrates the pace of that growth. Doubao is now processing more than 50 trillion tokens per day this month, up from just 4 trillion tokens in December 2024. Tan Dai, president of Volcano Engine, recently said the platform has served more than 100 corporate clients, collectively processing over 1 trillion tokens to date.

Alongside its reliance on Nvidia, ByteDance is working to reduce long-term exposure to supply constraints and geopolitical risk by building internal semiconductor capabilities. Its in-house chip design unit, which employs around 1,000 staff, has made progress on a processor that matches the performance of Nvidia’s H20 chip — a China-tailored product — but at a lower cost, according to one of the sources.

The H20 was designed by Nvidia to comply with earlier U.S. export controls before being blocked, and its absence has accelerated efforts by Chinese firms to develop domestic alternatives. ByteDance is not alone in this push. Other Chinese technology groups are pursuing similar strategies to gain greater control over chip supply, pricing, and long-term planning.

Beyond processors, ByteDance has also been investing in memory technologies, including high-bandwidth memory, through a combination of internal research and equity stakes in specialized start-ups. These components are critical for training and running large AI models efficiently, and shortages can be as constraining as limited access to GPUs.

Internally, ByteDance’s chip arm works closely with Seed, the company’s frontier AI research team, highlighting how semiconductor design is becoming increasingly central to core AI development rather than a peripheral function.

Reflecting growing geopolitical sensitivity, ByteDance transferred its chip unit to a Singapore-incorporated subsidiary, Picoheart, in September. The move came amid intensifying China–U.S. tensions over technology. Some employees based in mainland China have been asked about relocating to Singapore, particularly those working on projects considered more sensitive, according to staff familiar with the discussions.

On the supply side, Nvidia is racing to capitalize on pent-up Chinese demand. The company hopes to ship its newly approved H200 chips to Chinese customers before the Lunar New Year holiday in mid-February, Reuters has reported. Interest from Chinese technology groups has been strong, though Beijing has yet to approve any purchases, leaving timelines uncertain.

The H200 is Nvidia’s second-most powerful AI chip and a significant step up from products currently available to many Chinese firms. That performance gap explains why companies like ByteDance are willing to allocate tens of billions of yuan to secure access, even as domestic chipmakers gain ground.

Beijing, for its part, is attempting to strike a careful balance. While authorities want to accelerate AI development to support economic growth and technological leadership, they are also keen to promote the adoption of domestic chips from companies such as Cambricon Technologies, Huawei’s Ascend unit, Moore Threads Technology, and MetaX Integrated Circuits.

Whether ByteDance ultimately gets the green light to deploy Nvidia’s H200 at scale will be a key test of how that balance is managed — and a signal of how far China is willing to lean on foreign technology as it races to build its AI future.

President Xi Jinping declared on Wednesday that China is on course to achieve its “around 5%” growth target for 2025, reaching approximately 140 trillion yuan ($20 trillion), while pledging “more proactive” macroeconomic policies in 2026 to sustain momentum amid persistent domestic challenges and external trade frictions.

In a televised New Year’s address broadcast by state broadcaster CCTV and remarks at a traditional New Year’s tea party with top Communist Party officials, Xi described 2025 as an “extraordinary” year marked by strong resilience, export performance, and technological breakthroughs.

“Our country’s economy is expected to move forward under pressure… showing strong resilience and vitality,” he told party leaders, highlighting advancements in defense capabilities and science and technology as reaching “new levels.”

The confirmation aligns with official projections and recent data showing robust exports offsetting weaknesses in consumption and property investment. China’s trade surplus surpassed $1 trillion for the first time in November, driven by front-loading ahead of potential U.S. tariffs and resilient global demand for manufactured goods. Full-year growth is widely anticipated to land near the target, buoyed by fiscal stimulus, including special treasury bonds and a record surplus providing FX buffers.

However, independent analyses paint a more nuanced picture. The Rhodium Group think tank estimated actual growth at just 2.5% to 3%—roughly half the official figure—citing discrepancies in data reporting and underlying economic strains. BBVA Research raised its 2025 forecast to 5.0%, noting strong first-half performance and stable Q3 growth at 4.8%, down 0.4 points from Q2. The first three quarters officially grew 5.2%, but the seasonally adjusted quarter-on-quarter pace slowed, reflecting headwinds like soft household spending and property woes.

Xi reiterated commitments to “improve the quality of the economy while maintaining reasonable growth” and advance “common prosperity,” but offered no specific new measures. The emphasis echoes the Central Economic Work Conference earlier this month, where leaders pledged a “proactive” fiscal stance for 2026—including “special actions to boost consumption”—and acknowledged “prominent” imbalances between strong supply and weak demand.

Policymakers have allocated 62.5 billion yuan from special treasury bonds for a 2026 consumer goods trade-in scheme offering subsidies for appliances, and front-loaded 295 billion yuan in central budget funding for major projects.

Xi spotlighted China’s “fastest growing innovation capabilities,” citing surges in artificial intelligence, large language models, and “new breakthroughs in independent chip development.” This reflects Beijing’s intensified drive for self-reliance amid U.S. export controls on advanced semiconductors.

The National Integrated Circuit Industry Investment Fund (“Big Fund”) launched its third phase in 2024 with 344 billion yuan in capital, channeling hundreds of billions into domestic chipmaking. Reports emerged this month of Chinese scientists advancing a prototype extreme ultraviolet lithography machine capable of producing cutting-edge nodes—a capability Washington has sought to restrict.

Despite export strength, second-half momentum faltered with soft household spending, persistent deflation with core CPI averaging below 1%, and a prolonged property crisis dragging on developer liquidity and consumer confidence. Property investment contracted 10% in 2025, while retail sales growth slowed to 3%.

Policymakers have responded with targeted measures: allocating 62.5 billion yuan from special treasury bonds for a 2026 consumer goods trade-in scheme offering subsidies for appliances, and front-loading 295 billion yuan in central budget funding for major projects.

Concerns over a second-half slowdown persist, weighed down by soft household consumption, persistent deflation, and a prolonged crisis in the property sector. Despite exports holding up, growth momentum has faltered, weighed down by soft household consumption, persistent deflation, and a prolonged property sector crisis.

China’s trade surplus, which topped $1 trillion for the first time in November, could lead to more tensions with trade partners, some of which are calling on China to do more to reform its economy and reduce its dependence on exports to support growth.

Analysts anticipate continuity in “moderately loose” monetary settings and expanded fiscal support, potentially via a higher deficit target of 4% of GDP and more special bonds. Focus areas include consumption vouchers, property stabilization (white-list financing, inventory purchases), and high-tech investment.

Chinese equities capped a strong year, with the Shanghai Composite Index gaining 18%—its best since 2019—and the blue-chip CSI300 also up 18%, the strongest in five years. The onshore yuan appreciated past the psychologically key 7-per-dollar level for the first time in 2.5 years, on track for its largest annual rise since 2020, supported by capital controls and export earnings.