Microsoft makes big move into AI in China by selling OpenAI models

issued Thursday, June 18, 2026 · 07:33 AM

[SAN FRANCISCO/HONG KONG] Despite the escalating conflict between the United States and China over artificial intelligence, Microsoft has built a large business selling AI models to Chinese companies.

Social media and AI giant ByteDance has generally been Microsoft’s biggest AI customer in recent years, primarily using OpenAI models, according to people familiar with the matter. The Beijing-based company plans to spend more than $1 billion a year on Microsoft’s AI and cloud services, said some of the people, who requested anonymity to discuss private matters.

Other Chinese tech companies, including Ant Group, Meituan and Tencent Holdings, are also spending heavily on AI models through Microsoft’s Azure cloud service, people familiar with the industry said.

Microsoft believes it would be beneficial to have a presence in China to keep up with local innovation and serve multinational customers, according to people familiar with the company’s thinking. In Congressional testimony, President Brad Smith said the company’s China business remains relatively small, expected to account for only about 1.5% of total revenue in 2024.

However, the company’s business in China has been controversial in some quarters. U.S. tech executives and lawmakers say China’s AI push poses a potential existential threat to U.S. industry. Anthropic PBC and OpenAI do not sell their models to Chinese companies, citing fears of intellectual property theft or harmful use.

Microsoft and OpenAI declined to comment.

Microsoft hasn’t shown similar concerns behind the scenes, quite the opposite. During an internal sales meeting in July 2025, then-Chief Commercial Officer Judson Althoff touted Microsoft’s rapid growth in AI in China, according to records reviewed by Bloomberg.

“The best AI solutions in the world are being built on the West Coast of the United States and the East Coast of China,” Althoff said. “It’s Microsoft that brings these two places together, which is really great.”

Althoff told employees that Azure’s AI revenue in China is growing faster than any other sales region, nearly tripling in the fiscal year ending June 2025 and surging 400% year over year.

Due to its unique partnership with OpenAI, Microsoft has set its own policies regarding the sale of models such as the GPT series in China. We also offer a variety of other AI models, with a few exceptions like Anthropic.

Microsoft sells them to customers for a variety of uses, from software development to customer service automation.

ByteDance, Meituan, and Tencent did not respond to requests for comment, and it is unclear how they are using models purchased from Azure. Sources familiar with the company’s business say much of the spending is going to support expansion outside China.

All Chinese companies named in this article train their own AI models. For example, ByteDance offers an AI chatbot called Doubao that is widely used in China. A Microsoft team based in Asia will manage ByteDance as a customer, according to people familiar with the deal.

An Ant Group spokesperson said the company independently develops its own AI models and its core product does not rely on external models.

OpenAI has occasionally complained privately to Microsoft for not doing enough to prevent Chinese companies from copying its models, a process known as “distillation,” according to people familiar with the discussions. It’s unclear what changes, if any, OpenAI is seeking from Microsoft’s policies.

Microsoft employs automated monitoring to prevent customers from using AI models to build competing products.

In China, the company sells its AI models only to established companies, not individual developers, according to local regulations, according to people familiar with the matter.

Still, Chinese customers are not subject to increased scrutiny by Microsoft regarding its use of AI models, according to people familiar with the process.

Furthermore, we cannot completely prevent companies from using OpenAI models to build their own models, such as generating synthetic data for training purposes.

To sell products in China, Microsoft must partner with local providers. The company operates multiple data center regions domestically near Beijing and Shanghai.

However, under the agreement with OpenAI, Microsoft does not host the models on server farms in China due to the risk of intellectual property theft, according to people familiar with the deal.

Instead, customers must access models over the Internet from facilities in other countries, such as Singapore. bloomberg