Doubao Cuts, Tencent Pivots: China’s AI Enters A Self-Correction Cycle
Doubao Cuts, Tencent Pivots: China’s AI Enters A Self-Correction Cycle
Publish Date: 2026-05-18 03:00:00
Source Domain: www.forbes.com
CHONGQING, CHINA – DECEMBER 29: In this photo illustration, a person interacts with the Doubao app on a smartphone, with the ByteDance logo visible in the background, showcasing the growing use of AI-driven applications in creating personalized virtual avatars, on December 29, 2024 in Chongqing, China. Artificial Intelligence (AI) has become a cornerstone of China’s strategic ambitions, with the government aiming to establish the country as a global leader in AI by 2030. (Photo illustration by Cheng Xin/Getty Images)
Getty Images
In recent weeks, a widely circulated internal update from ByteDance revealed a striking decision: the company has cut roughly 30% of its AI application projects and explicitly abandoned the “spray-and-pray” product strategy that once defined China’s mobile internet playbook.
This is an early signal that China’s AI application layer (once inflated by capital, experimentation, and hype) is entering a structural reset. As one industry analyst put it: “The mobile internet expansion logic no longer works in the AI era.”
A Cost Structure That Punishes Growth
The most revealing detail is financial.
ByteDance’s AI inference costs in 2025 reportedly exceeded RMB 8 billion — approximately 2.3 times its incremental revenue from AI products. One executive summarized the problem bluntly: “At this burn rate, you can’t build another Doubao.”
The underlying dynamic is counterintuitive. In the mobile era, scale drove profitability; marginal costs approached zero as user growth accelerated. In AI, every additional query incurs real compute and storage costs — unlike the mobile internet era, where costs were largely offloaded to user devices, AI centralizes that burden back onto the provider. Growth deepens losses.
This inversion explains why ByteDance’s goal of launching three AI apps with over 10 million daily active users resulted in zero successes, despite billions poured into AI video, writing, and education tools. Doubao’s…
