Microsoft Sells OpenAI Models to Chinese Firms via Azure

Microsoft Corp. has built a substantial business selling OpenAI models to Chinese companies through its Azure cloud service, effectively bypassing the direct sales bans maintained by OpenAI and Anthropic PBC due to security and intellectual property concerns. ByteDance, the parent company of TikTok, has emerged as the largest customer in the region and is on track to spend more than $1 billion annually on these services. Other major clients include Tencent Holdings Ltd., Ant Group Co., and Meituan.

Internal documents indicate that Azure's AI revenue in China tripled in the fiscal year ending June 2025, following a 400% surge the previous year. To mitigate the risk of intellectual property theft, Microsoft does not host these models in Chinese data centers. Instead, it routes access through internet facilities in other countries, such as Singapore.

Despite the financial success, OpenAI has privately expressed concerns to Microsoft regarding model distillation, a process that could allow Chinese firms to copy its technology. Simultaneously, ByteDance is diversifying its own infrastructure by shifting toward domestic Chinese chip suppliers to avoid U.S. regulations on Nvidia hardware.