ByteDance has generally been Microsoft’s single biggest AI customer in recent years, and it is on track to spend more than $1bn a year on Microsoft’s AI and cloud services, Bloomberg reports.
The striking part is what the TikTok owner is mostly buying: OpenAI models, sold through Microsoft’s Azure cloud, in a market that OpenAI itself will not serve directly.
Both OpenAI and Anthropic decline to sell their models to companies in China, citing fears of intellectual-property theft and harmful use. Microsoft, thanks to its unusual partnership with OpenAI, sets its own China policy and sells the GPT series there anyway. It offers other models too, though not Anthropic’s.
ByteDance is not alone. Ant Group, Meituan, and Tencent are also significant buyers of AI models through Azure, according to Bloomberg’s sources.
The fastest-growing AI market Microsoft has #
Internally, Microsoft has treated this as a win rather than a liability.
At a July 2025 sales meeting, then chief commercial officer Judson Althoff told staff that Azure’s AI revenue was growing faster in China than in any other territory, roughly tripling in the financial year to June 2025 after a 400 per cent surge the year before, according to a transcript reviewed by Bloomberg.
“The world’s most elite AI solutions are being built on the western coast of the United States and the eastern coast of China,” Althoff said. “The one company bringing those two places together is Microsoft.”
The business is still small in context. China accounted for about 1.5 per cent of Microsoft’s overall revenue in 2024, president Brad Smith told Congress.
Why it is sensitive #
The sales sit awkwardly against a louder political mood. American executives and lawmakers have called China’s AI push a potential existential threat to the US industry, and Washington has just tightened the rules on who can reach the most powerful American models.
OpenAI has privately complained that Microsoft is not doing enough to stop Chinese firms from copying its models, a process known as distillation, according to Bloomberg. Microsoft says it uses automated monitoring and only sells to established companies, not individual developers, but Chinese customers are not subject to heightened scrutiny, and synthetic-data training is hard to prevent.
There are limits Microsoft does observe. Under its OpenAI agreements, it does not host the models in its Chinese data centres, near Beijing and Shanghai, for fear the IP could be stolen. Customers instead reach them over the internet from facilities in other countries, such as Singapore.
The other direction of travel #
While ByteDance buys American models, it is moving its actual compute the other way. The company is accelerating a shift towards domestic chips for AI workloads, SCMP reports, and is weighing orders from a group of smaller Chinese suppliers, so-called tier-two chipmakers such as Biren, MetaX, Iluvatar CoreX, Moore Threads, and Enflame, as Nvidia’s access to China stays blocked by regulation.
That leaves ByteDance hedging both sides of the AI cold war at once: renting the West’s best models through Microsoft, while building its hardware base at home. The question Microsoft cannot fully answer is what its biggest AI customer is ultimately training.
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