The global race for artificial intelligence dominance is intensifying, and TikTok’s parent company, ByteDance, is navigating a complex landscape of US export controls with a strategic workaround. Rather than directly importing advanced AI chips prohibited for sale to China, ByteDance is leveraging infrastructure in Malaysia to access the computing power it needs, a move that highlights the evolving tactics companies are employing to overcome geopolitical restrictions.
Since 2022, US regulations have restricted NVIDIA from selling its most advanced AI accelerators directly to China, putting Chinese tech firms at a disadvantage compared to their US counterparts like Google, OpenAI, Microsoft, and Anthropic, who have unfettered access to NVIDIA’s cutting-edge technology. ByteDance, determined to remain competitive, has found a legally ambiguous, yet effective, path forward.
According to a report by the Wall Street Journal, ByteDance is collaborating with Southeast Asian firm Aolani Cloud to establish a cluster of approximately 500 NVIDIA Blackwell computing systems in Malaysia, comprising roughly 36,000 B200 chips. The estimated cost of this infrastructure exceeds $2.5 billion. This substantial investment underscores ByteDance’s commitment to expanding its AI capabilities outside of China.
The servers are being assembled by Aivres, a company specializing in building hardware with NVIDIA chips. Aolani, founded in late 2023 and structured as a holding company in the Cayman Islands with venture capital backing from Singapore, had already been leasing servers with H100 chips to ByteDance in Malaysia as early as February. This arrangement is key to the legality of the operation.
The Legal Nuance: Renting, Not Buying
ByteDance isn’t purchasing the chips or servers outright; it’s renting access to computing capacity. Aolani owns and operates the hardware physically located in Malaysia, a country not subject to US export restrictions. As a NVIDIA spokesperson explained to the Wall Street Journal, “By design, export controls allow for the building and operation of clouds outside of restricted countries.” NVIDIA also stated that all customers utilizing its chips undergo internal compliance reviews prior to receiving products. ByteDance itself is not currently listed on any restricted entities lists maintained by the US Department of Commerce, further mitigating immediate concerns.
Geopolitical Considerations and Potential Regulatory Shifts
While currently legal, this strategy isn’t without political implications. Aolani acknowledged in an internal investor presentation that We see working with a US law firm to ensure regulatory compliance and is anticipating potential future regulatory changes that “would likely be prospective, not retroactive.” This cautious statement suggests an awareness that Washington could potentially move to limit such arrangements in the future. Reuters reported last month that the US government was considering allowing ByteDance to purchase H200 chips from NVIDIA, though NVIDIA had not yet accepted the proposed conditions.
ByteDance’s Expanding AI Ambitions
ByteDance’s pursuit of advanced computing power reflects its broader ambitions in the AI space. The company already operates five of the top 50 most popular AI applications globally, based on monthly active users, according to data from Andreessen Horowitz. These include the Dola chatbot, the Dreamina AI video generation platform, and Gauth, an educational assistant. Notably, ByteDance’s Seedance video generator, which creates remarkably realistic videos from text prompts, has gained significant viral attention. The company is actively expanding its AI research teams, with hubs in Singapore, San Jose, and Seattle, and is currently seeking to fill over 100 AI-related positions in the US. As CEO Liang Rubo stated, “Our goal is to reach the highest peak.”
This strategic move by ByteDance highlights a growing trend among Chinese tech companies to rent computing capacity in locations like Singapore, Malaysia, Thailand, and the Philippines to circumvent US export controls. The long-term viability of this approach remains uncertain, as US regulators continue to evaluate the implications of this evolving landscape.
As the US and China continue to navigate the complexities of technology transfer and national security, expect further innovation in how companies access and deploy critical AI infrastructure. The situation warrants continued monitoring as regulatory frameworks adapt to these evolving strategies.
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