ByteDance's massive fundraising once again confirms a harsh reality: the cost for internet giants to transform into AI companies is far beyond imagination.

According to Caixin, ByteDance's domestic revenue in 2025 grew by nearly 20% year over year, overseas revenue by nearly 50%, overseas revenue's share surpassed 30%, and TikTok Shop's GMV growth rate approached 70%. However, behind this strong revenue growth came the price of a more than 70% year-over-year decline in net profit—under International Financial Reporting Standards, 2025 net profit is only about $9 billion. Li Liang, vice president of Douyin, clarified that this figure includes changes in preferred share and option costs and does not reflect operational substance, but the erosion from AI investment can no longer be avoided.

Capital expenditures best illustrate the situation. In 2024, ByteDance’s AI-related capex was about RMB 80 billion, already nearing the combined total of Baidu, Alibaba, and Tencent. In 2025, this figure surged to around RMB 160 billion. In 2026, it is planned to be increased further to over RMB 200 billion, and discussions are underway about raising annual AI infrastructure investment to USD 70 billion (about RMB 500 billion). About half of the spending is used for AI chip procurement, while the rest goes to underlying infrastructure such as data centers and liquid-cooling systems. Even with a valuation of USD 312 billion to raise funds in global markets, ByteDance still needs to supplement its “ammunition” through diversified means such as bank loans and share buybacks.

In stark contrast is Tencent’s steadiness. Tencent’s revenue in 2025 was RMB 751.8 billion, and its attributable net profit was RMB 224.8 billion, up 16% year over year. Its capital expenditures were only RMB 79.2 billion. Tencent uses social, gaming, and financial services as its “anchor assets,” and keeps its AI investment on a “small steps, quick runs” track—without sacrificing core profit in exchange for growth. ByteDance, on the other hand, relies heavily on short-video feed advertising, has a relatively single business structure, and is weak against cyclical risks. Once it makes major strategic investments, profits can plunge.

This reveals a truth about the industry: AI is not just an incremental “bonus” business—it is the reconstruction of underlying infrastructure. Compute power, chips, talent, data—each one is an endless sink. ByteDance is already a super platform with 1.5 billion monthly active users worldwide. The monetization efficiency of TikTok and Douyin is arguably top-notch, yet they still need continuous external funding. This is not because management is poor—it’s an unavoidable cost of a technological paradigm shift. When algorithmic recommendations evolve into model-driven systems, yesterday’s traffic windfalls must be converted into compute reserves; otherwise, you are out of the race under a dimensionality-reduction blow.

Looking deeper, ByteDance’s choices are also a helpless move. Geopolitical risks abroad and rising compliance costs are climbing steadily. Expanding TikTok in global markets requires substantial resources to back it up. Domestically, AI products such as Doubao have reached 75 million monthly active users, but monetization is still in its early stage and clearly cannot cover the tens of billions in (hundreds-of-billion) yuan-level investment. Financing is not the starting gun for expansion—it’s the entry ticket for survival.

When internet giants pivot to AI, fundamentally it is a high-stakes gamble of “using today’s profits to buy tomorrow’s ticket on the ship.” ByteDance is already one of China—and indeed the world’s—most profitable tech companies, yet it still needs capital at such a massive scale. For companies that are smaller and have thinner cash flows, the pressure is unimaginable. There is no middle ground in the AI race—either go all in or exit. ByteDance’s huge financing is just a warning bell for the entire industry: the entry ticket for a technological revolution is expensive beyond imagination.$NVDAB