TikTok's Major Role in Microsoft's AI Cloud Business

TikTok has emerged as a significant player in Microsoft's AI cloud computing business. According to The Information, as of March, TikTok was paying Microsoft almost $20 million per month to access OpenAI’s models. This hefty sum accounted for nearly a quarter of the revenue generated by Microsoft's increasingly lucrative cloud division.

Microsoft's cloud AI business was projected to earn $1 billion annually. However, the landscape may shift if TikTok's parent company, ByteDance, develops its own large language model (LLM). Alex Heath previously reported that ByteDance was "secretly using" OpenAI’s technology to create its own LLM, which is generally considered a faux pas in the AI industry. This practice directly violates OpenAI’s terms of service, which prohibit the use of their model outputs to develop competing AI models.

Following these revelations, OpenAI suspended ByteDance’s account to investigate potential violations of its developer license. ByteDance told CNN that it was using the technology "to a very limited extent" to assist in creating its own models.

Microsoft, which has a multibillion-dollar investment in OpenAI, serves as the exclusive cloud provider for OpenAI. The company has invested "several hundreds of millions of dollars" in building a supercomputer to support ChatGPT. In its Q4 2024 earnings report, Microsoft announced a 29% growth in Azure revenue, slightly below the projected 30-31%. CFO Amy Hood projected 28-29% Azure revenue growth for Q1 2025. TikTok's significant payments highlight its pivotal role in Microsoft's cloud AI business, even as the dynamics may evolve with ByteDance's independent developments.