ByteDance becomes Microsoft's biggest AI customer, spending over $1bn on OpenAI models

ByteDance is Microsoft's biggest AI customer

OpenAI and Anthropic refuse to sell their models in China. Microsoft, through its OpenAI partnership, sells them to TikTok's owner, and Azure's fastest AI growth is now Chinese. 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.

Microsoft makes big AI inroads in China by selling OpenAI models

Microsoft has built a big business selling artificial intelligence models to Chinese companies despite the growing rivalry between the U.S. and China over the technology. Social media and AI giant ByteDance has generally been Microsoft's biggest AI customer in recent years, largely using OpenAI models, according to people familiar with the matter. The Beijing-based company is on track to spend more than $1 billion a year on Microsoft AI and cloud services, said some of the people, who requested anonymity to discuss a private matter. Other Chinese tech firms, such as Ant Group, Meituan and Tencent Holdings are also significant spenders on AI models via Microsoft's Azure cloud service, people familiar with the business said. Microsoft finds it useful to have a presence in China to keep up with local innovations and serve multinational customers, according to a person familiar with the company's thinking. The China operation remains relatively small and accounted for only about 1.5% of overall revenue in 2024, Microsoft President Brad Smith said during congressional testimony. But the company's China business is controversial in some quarters. American tech executives and lawmakers have described China's AI push as a potentially existential threat to the U.S. industry. Citing fears of intellectual property theft or harmful uses, Anthropic and OpenAI don't sell their models to companies in China. Microsoft and OpenAI declined to comment. Behind the scenes, Microsoft has not demonstrated the same apprehensions -- quite the opposite. During an internal sales meeting in July 2025, then-Chief Commercial Officer Judson Althoff touted Microsoft's rapid AI growth in China, according to a transcript reviewed for this article. "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. It's pretty awesome." Azure's AI revenue was growing faster in China than in any other sales territory, Althoff told employees -- about tripling in the fiscal year that ended in June 2025 and surging 400% the previous year. Due to a unique partnership with OpenAI, Microsoft sets its own policies on selling models such as the GPT series in China. It also offers a variety of other AI models there, excluding some like Anthropic's. Microsoft markets them to customers for a number of uses, ranging from software development to customer service automation. ByteDance, Meituan and Tencent didn't respond to requests for comment, and it's unclear how they use the models they buy on Azure. Much of their spending goes toward supporting expansion outside of China, according to people familiar with their businesses. The Chinese companies named in this story all train their own AI models. ByteDance,...