ByteDance Challenges Alibaba’s Cloud Dominance with Aggressive AI Push

ByteDance is making significant strides in the cloud services sector through its subsidiary Volcano Engine, leveraging its vast data resources and AI capabilities to compete with established players like Alibaba and Tencent. The company has captured nearly 13% of China's AI cloud services revenue in the first half of 2025, generating $390 million—trailing only Alibaba's 23% market share.

Volcano Engine now ranks as China's second-largest provider of AI-related infrastructure and software, according to IDC data. While ByteDance holds just 3% of the broader cloud market, its growth in the high-margin AI segment is outpacing rivals. "ByteDance’s growth trajectory and AI-led strategy suggest it could become one of the dominant players as demand for AI accelerates," said Forrester analyst Charlie Dai.

The company is undercutting competitors with aggressive pricing while offering custom AI tools built on its proprietary technology and GPU infrastructure. This approach is reshaping China's cloud computing landscape, traditionally dominated by Alibaba, Tencent, and Huawei.