Microsoft is building a large AI business in China by supplying OpenAI models through Azure to major local technology companies, positioning itself as a key provider in a market where US competitors are less active.

What happened: ByteDance is reported to spend over US$1b annually on Microsoft AI and cloud services, with Ant Group, Meituan, and Tencent also using Microsoft models through Azure.

Why it matters: Microsoft is extending its cloud and AI footprint into a significant new customer base at a time when several US rivals like Alphabet and Amazon are less present in China. This adds a large use case for Azure infrastructure and OpenAI model access alongside the company's US and Europe operations.

What to watch: The arrangement raises questions around long-term regulatory, security, and intellectual property considerations, since Microsoft is linking exclusive OpenAI access with demand from Chinese platforms while also exploring lower-cost alternatives like DeepSeek for other products.