Alibaba, ByteDance and the New Race for AI Leadership in China: Cuts, Reorganisations and Future Bets
Alibaba cut its workforce by 34% in 2025, from around 245,000 to 162,000 employees, while CEO Eddie Wu announced a target of over $100 billion in annual AI and cloud revenue within five years. ByteDance leads in AI hardware, leaving Alibaba and Tencent on the defensive. Samsung and SK Hynix surpassed Alibaba and Tencent in market capitalisation for the first time in 2026.
The transformation taking place in the leadership of China's major tech companies is not just a story of downsizing. It is a large-scale strategic reorientation that reveals how the AI market is reshuffling corporate power in the global tech sector.
Alibaba and Eddie Wu's Bet
CEO Eddie Wu, who took the helm of Alibaba in September 2023 succeeding Daniel Zhang, presided over the largest restructuring in the company's history. By 2025, Alibaba's workforce fell from approximately 245,000 to around 162,000, a reduction of 34%. The primary cause: divestment in non-core businesses (including the Sun Art supermarket chain and the Intime department store network) and reduction of overhead in existing operations.
Wu announced that Alibaba aims to grow its cloud and AI revenue to over $100 billion annually in the next five years. Alibaba Cloud is the largest cloud provider in China and Southeast Asia, but faces increasing competition from Huawei Cloud and the cloud initiatives of other Chinese tech giants.
The reorganisation of AI leadership was particularly visible: in March 2026, Alibaba restructured its AI division following the departure of a key executive, consolidating the development of foundation models and generative AI applications under a new unified structure.
ByteDance as a Systemic Threat
ByteDance, the parent company of TikTok, has become the primary threat to Alibaba and Tencent on an unexpected front: AI hardware. Reports from 2025 indicate that ByteDance is developing proprietary AI chips at a speed that concerns both its Chinese competitors and observers in the semiconductor sector. The company has access to top-notch chip engineering talent and financial resources to compete with the ASIC initiatives of American hyperscalers.
ByteDance's threat to Alibaba and Tencent goes beyond competition for app users: it is competition for AI infrastructure and the ability to offer competitive cloud services to companies looking to build on proprietary foundation models.
The Reconfiguration of Value
In February 2026, Bloomberg reported that Samsung and SK Hynix surpassed Alibaba and Tencent in combined market capitalisation for the first time. This symbolic event reflects the reevaluation the market is making regarding where value lies in the AI chain: increasingly, in semiconductor infrastructure and less in application platforms, at least in the short term.
For Western companies operating in China or monitoring the Asian market, the dynamics between Alibaba, ByteDance, and Tencent are a relevant indicator of which layer of the Chinese AI ecosystem is capturing more value and which direction local regulation will favour in the upcoming investment cycles.