Tencent Holdings and Alibaba Group have purchased graphics processing units (GPUs) from ByteDance, the owner of TikTok, as reported by Caijing.

ByteDance had stockpiled around 100 billion yuan (US$13.7 billion) worth of Nvidia H20 chips, which are now restricted from export to China due to tightened US regulations.

In the first quarter of 2025, Tencent reportedly spent about 2 billion yuan (US$279.7 million) on GPUs to support its AI initiatives.

This includes its ChatGPT-like application, Yuanbao.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Strategic chip stockpiling reflects China’s semiconductor vulnerability

ByteDance’s massive $13.7 billion stockpile of Nvidia H20 chips represents a strategic response to China’s longstanding semiconductor vulnerability.

This stockpiling pattern appears driven by China’s historical struggles to develop competitive domestic chip manufacturing capabilities, with experts estimating Chinese chipmakers remain at least five years behind global leaders despite significant government investment 1.

The Chinese government has recognized this critical weakness, establishing the National Integrated Circuits Industry Investment Fund and committing approximately $180 billion to boost domestic semiconductor production 2.

ByteDance’s substantial inventory and willingness to sell to competitors like Tencent and Alibaba demonstrates how Chinese tech giants are adapting to semiconductor scarcity amid tightening U.S. export restrictions.

This secondary market for AI chips has emerged as a pragmatic workaround to ensure continued AI development despite supply constraints, showing how market forces find ways around regulatory barriers.

2️⃣ Intensifying AI race drives unprecedented resource sharing among rivals

The unusual scenario of ByteDance selling critical AI chips to direct competitors Alibaba and Tencent highlights the extraordinary pressures in China’s AI development landscape.

This rare resource-sharing arrangement comes as Chinese tech giants are making massive AI investments, with Alibaba alone committing $53 billion over three years to enhance its AI capabilities and cloud infrastructure 3.

The competitive stakes are enormous as Chinese firms like Baidu, Alibaba, and Tencent race to close the performance gap with U.S. AI models. This peer-to-peer chip trading reflects both the critical importance of computational resources in AI development and the pragmatic flexibility of Chinese tech giants in adapting to supply constraints.

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