ByteDance Challenges Alibaba's Position
China's cloud services market is undergoing a dramatic transformation. ByteDance, the company behind the popular TikTok app, is aggressively expanding into cloud services through its Volcano Engine division. In recent months, the company has significantly expanded its sales teams and is undercutting competitors on price.
According to employees, customers, and competitors, ByteDance offers corporate clients products that leverage vast data resources and computing infrastructure. Its key product is HiAgent, a service that creates custom AI assistants using the company's proprietary models.
This strategy is disrupting a multibillion-dollar industry long dominated by Alibaba, Tencent, and Huawei. According to IDC data, Volcano Engine has become China's second-largest provider of AI infrastructure and software, behind only Alibaba.
In the first half of 2025, ByteDance captured nearly 13% of China's AI cloud services revenue, amounting to CZK 9.3 billion. Only Alibaba performed better, with 23% of the segment. However, ByteDance's overall share of China's cloud market remains around 3%.
Analysts point out, however, that the company is advancing rapidly in AI services, the fastest-growing part of the sector. Charlie Dai, vice president and principal analyst at Forrester, said: "ByteDance's growth trajectory and AI-led strategy suggest that it could become one of the dominant players as demand for AI accelerates. It has leveraged its wealth of data and extensive GPU infrastructure to develop AI tools for customers, combined with aggressive pricing."
Alibaba Creates New Consumer Division
While ByteDance is targeting the enterprise market, Alibaba Group Holding announced in December 2025 the creation of a new division focused on consumer applications of artificial intelligence. The new Qwen Consumer Business Group, led by Alibaba Vice President Wu Jia, will oversee the Qwen chatbot, the Quark AI assistant and cloud storage, AI hardware products, the UC Browser, and the Shuqi online reading platform.
This move represents a significant organizational change at Alibaba aimed at boosting consumer adoption of its AI offerings after securing a dominant position in open-source models for developers. The division's top priority is to turn the Qwen chatbot into an accessible "super app" for use in glasses, personal computers, and cars.
The Qwen App and the Competitive Battle
The Qwen app, a revamped version of Alibaba's former Tongyi app, was relaunched in November 2025. It is considered the company's most ambitious attempt to break into the consumer AI market, where standalone chatbot apps from foreign AI companies such as OpenAI, Google, Anthropic, and xAI, as well as domestic competitors including ByteDance, Tencent, Baidu, DeepSeek, and Moonshot, are all competing for users.
The free multipurpose Qwen app, which can answer questions, transcribe audio, generate photos and videos, conduct research, and create presentations, recorded more than 10 million downloads during the first week of its public beta. This surpassed the initial adoption of ChatGPT and DeepSeek when they launched.
Investment in Computing Power
ByteDance is investing heavily in computing power. The company is among China's largest buyers of AI hardware and was Nvidia's largest customer in the country in 2024. The Financial Times reported that the company plans to spend 85 billion yuan (about CZK 280 billion) on AI processors this year and is preparing to purchase a significant number of Nvidia H200 chips if Chinese authorities approve access.
Edison Lee, head of China technology analysis at Jefferies, commented: "ByteDance has strong software capabilities and sufficient hardware resources to gain market share. But it lacks deep industry expertise and experience serving enterprise customers across many different sectors. It is catching up and taking share from Tencent and Huawei."
Market Opportunities
China's technology giants are providing ByteDance with an opportunity to gain further market share. Tencent said it is prioritizing its GPU resources for internal use rather than expanding cloud services for external customers. Meanwhile, Huawei scaled back its AI cloud ambitions over the past year and focused on selling its Ascend chips directly to clients. Both companies recorded slight declines in their AI cloud market shares in the first half of 2025.
During a conference call following the announcement of Alibaba's third-quarter results, CEO Eddie Wu Yongming said the company is making progress on both the enterprise AI and consumer AI fronts. On the enterprise side, it is building "fully integrated" AI capabilities, including high-performance infrastructure, foundation models, and development frameworks.
Alibaba reported a 34% year-over-year increase in cloud computing revenue to 39.8 billion yuan (approximately CZK 131 billion) in the second quarter, while revenue from AI-related products has achieved triple-digit growth for nine consecutive quarters.
Sources: finance.yahoo.com and en.cryptonomist.ch
