ByteDance is reportedly in advanced talks to buy custom AI chips.

ByteDance, the parent company of TikTok, is in advanced talks to buy custom AI chips from Taiwan's MediaTek for use in its data centers. Under the deal, MediaTek would deliver a yet-to-be-determined volume of application-specific integrated circuits (ASICs), chips engineered around a particular customer's computing environment.

The agreement would make ByteDance MediaTek's second major ASIC customer and support the company's effort to expand beyond mobile chips and compete with Qualcomm. According to a Bloomberg report, MediaTek expects AI chip sales to reach about $2 billion this year and is targeting a 15% share of the $80 billion market next year.

Chinese companies are looking for alternatives as U.S. export controls restrict access to Nvidia's most advanced AI chips, while domestic suppliers such as Huawei cannot meet all demand. Those controls apply broadly to advanced semiconductors based on technical thresholds and end use, so custom AI accelerators are not automatically exempt, according to Tech in Asia.

ByteDance has also held talks with Qualcomm separately on custom silicon design services and reached an AI chip supply deal with Qualcomm earlier this year, according to people familiar with the matter.

According to Bloomberg, ByteDance may increase its capital expenditure to as much as $70 billion this year, more than twice what the company spent in the prior year. Spending could reach $100 billion in 2027 if economic and business conditions are favorable. ByteDance secured a $30 billion loan in September to fund the outlay.

Last month, Nvidia said it is investing $3.5 billion in MediaTek in its latest effort to widen financial ties across the AI industry. The investment is part of MediaTek's record $3.9 billion overseas convertible bond offering.

As part of the deal, MediaTek will let customers use Nvidia's technology to design their own AI chips that connect directly to Nvidia's larger computing systems. The technology, called NVLink Fusion, gives chipmakers ready-made connectors and specialized memory so custom AI chips can plug into Nvidia's data center systems. It saves time and engineering costs by letting companies focus on their own chip designs rather than building connections to Nvidia's systems from scratch. The deal builds on an existing relationship between the two companies.