Doubao Cuts, Tencent Pivots: China’s AI Enters A Self-Correction Cycle

InnovationConsumer TechDoubao Cuts, Tencent Pivots: China’s AI Enters A Self-Correction CycleByVivian Toh,Contributor.Forbes contributors publish independent expert analyses and insights. Vivian Toh is the chief editor of Tech Tech China covering China Tech Follow AuthorMay 18, 2026, 03:00am EDT--:-- / --:--This voice experience is generated by AI. Learn more.This voice experience is generated by AI. Learn more.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 ImagesIn 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 GrowthThe 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...