ByteDance is in late-stage talks with Taiwan's MediaTek on securing custom artificial intelligence chips for data centres.

On Oct. 15 (local time), IT and blockchain outlet Cryptopolitan reported that TikTok owner ByteDance has moved to secure alternative computing resources as U.S. export restrictions make it harder to obtain Nvidia's most advanced AI processors.

The talks cover application-specific integrated circuits (ASICs) designed to meet a specific customer's computing needs. Order volume has not been set, and no contract has been signed. If the talks succeed, ByteDance would become MediaTek's second major ASIC customer after Google.

The talks come amid U.S. restrictions on semiconductor exports to China. ByteDance, Alibaba and Tencent are in a situation where it is difficult to secure Nvidia's top-end AI processors. Domestic suppliers in China, including Huawei, are also not fully meeting demand.

U.S. rules still allow Chinese companies to work directly with chip design firms as long as performance stays below certain thresholds. ByteDance used that to agree in May to buy several million ASICs for AI data centres from Qualcomm. The talks with MediaTek are also seen as a move to expand AI computing infrastructure and diversify supply chains.

For MediaTek, the deal is a chance to expand its foothold in the data centre market. It is widening its push into the data centre infrastructure market based on capabilities built in its smartphone processor business. Winning a major customer such as ByteDance could boost its competitiveness in a market led by Qualcomm and Broadcom.

MediaTek expects AI chip revenue this year to reach about $2 billion. Its goal is to secure a 15 percent share of a market worth $80 billion by 2027. In September, Nvidia announced it would invest $3.5 billion in MediaTek through convertible bonds, adding momentum to expansion plans. MediaTek also gained access through the cooperation to Nvidia's NVLink Fusion platform, used to develop custom accelerator chips. By market capitalisation, MediaTek is Taiwan's second-largest company after TSMC.

ByteDance's large investment plans are also a backdrop to the race to secure AI chips. Bloomberg reported that ByteDance is considering raising capital expenditure this year to as much as $70 billion. That is more than double the previous year's spending. If investment conditions hold, spending in 2027 could approach $100 billion. ByteDance also secured a $30 billion loan in September to fund investment.

ByteDance is also competing in services with its flagship AI model, Seedance. Seedance competes with Alibaba's Happyhorse, Kuaishou's Kling AI and Google's AI product lineup. As AI service competition intensifies, reliably securing computing resources has emerged as a key task for ByteDance's infrastructure expansion.