When Tencent (TCEHY) and Alibaba (BABA) start blocking features on someone else's product, you know things got interesting fast. ByteDance, the company behind TikTok, launched an AI-powered smartphone last week that promised to change how people interact with their devices. Instead of sparking a tech revolution, it triggered a defensive scramble among China's biggest internet companies.
The Nubia M153 smartphone arrived as a trial product with an embedded AI assistant called Doubao that handles voice-activated controls, letting users operate their phone hands-free. Early adopters loved it. China's tech establishment? Not so much.
Tencent and Alibaba raised immediate red flags about security risks. But there's another concern lurking beneath the surface: if users spend their time talking to ByteDance's AI instead of scrolling through apps, those platforms lose engagement. And in the attention economy, that's existential.
The Digital Walls Go Up
The pushback came swiftly. Major platforms including Alibaba's fintech affiliate Ant Group's Alipay started limiting what Doubao could actually do. Chen Tang, a 21-year-old freelancer who bought the Nubia M153, told SCMP that Doubao could no longer operate apps like Pinduoduo, Taobao, Alipay, and Ele.me. Users could still log in manually, but accounts faced restrictions if controlled through Doubao.
ByteDance found itself forced to scale back Doubao's capabilities pretty dramatically. The company announced it would block the device from claiming incentives meant for active human users, disable interactions with financial apps like banking and payment services, and suspend AI features in competitive games to maintain fair play. ByteDance also responded by disabling WeChat control entirely.
It's a fascinating glimpse into the competitive dynamics of China's tech ecosystem, where companies operate on platforms they don't control and platform owners can flip switches whenever they feel threatened.
AI Ambitions While TikTok Faces U.S. Drama
The smartphone launch comes as ByteDance aggressively pursues its AI ambitions while simultaneously managing TikTok's uncertain future in the United States. The Trump administration recently struck a deal to keep TikTok operating in the U.S. after lawmakers demanded divestment or a ban over national security and privacy concerns tied to ByteDance's Chinese ownership.
But ByteDance isn't waiting around. Earlier in 2025, the company revealed plans to invest over $12 billion in AI infrastructure by year's end. That includes about 40 billion Chinese yuan ($5.5 billion) allocated for AI chip purchases in China alone, doubling last year's spending. Another roughly $6.8 billion is earmarked for overseas spending to enhance model training with advanced Nvidia chips.
The chip strategy reflects the geopolitical constraints ByteDance operates under. About 60% of domestic semiconductor orders will come from Chinese suppliers like Huawei and Cambricon, while the remaining portion uses Nvidia chips adapted to comply with U.S. export rules.
Valuation Soars on AI Potential
Major investors are betting big on ByteDance's AI transformation. As of February, the company's valuation exceeded $400 billion, backed by heavyweight investors including SoftBank Group (SFTBF), Fidelity, and T. Rowe Price Group (TROW).
Fidelity values ByteDance at over $410 billion. T. Rowe Price puts it above $450 billion. SoftBank's Vision Fund also raised its valuation past $400 billion, explicitly factoring in growth potential from Doubao, ByteDance's AI business.
The smartphone may have stumbled out of the gate, facing restrictions from wary competitors, but it represents something bigger: ByteDance's attempt to build an AI layer that sits between users and the apps they use. If successful, that's an incredibly powerful position. Which is exactly why everyone else is trying to stop it.
