ByteDance was valued at around US$220 billion in a recent private-market investment by Abu Dhabi artificial intelligence (AI) firm G42, a significant discount to the US$300 billion that TikTok’s owner set during a recent share buy-back programme.

G42, controlled by United Arab Emirates royal Sheikh Tahnoon bin Zayed Al Nahyan, acquired a US$100 million-plus stake from existing investors in recent months through its 42XFund, people with knowledge of the deal said. Another fund bought into ByteDance at US$225 billion shortly after, one of the people said, asking not to be identified describing non-public information.

The Chinese internet firm’s gyrating price tag reflects the uncertainty that has set in since Washington signalled it may be open to outlawing viral video phenom TikTok, which lawmakers have accused of being a national security threat. TikTok’s leadership is discussing the possibility of separating from its Chinese parent to help address those concerns, though that’s a last resort.

ByteDance sees valuation drop a quarter to US$300 billion after latest share buy-back

ByteDance’s valuation in the G42 transaction does not yet reflect potential after-effects of the Silicon Valley Bank implosion, which stunned start-ups from the US to China and has raised concerns about broader systemic risks. It remains well off a peak of around US$460 billion in 2021 when Tiger Global Management bought shares.

Sheikh Tahnoon – known as the UAE’s spymaster – has built a portfolio through G42 in everything from cloud computing to vaccines and driverless cars. Last year, his AI firm set up the US$10 billion 42XFund, which has additional financial backers, to invest in technology companies across emerging markets. It recently hired Jason Hu, the former investment head with China’s JD.com, to expand its footprint across Asia.

The Middle Eastern firm may be betting on ByteDance’s longer term potential, as a rebounding Chinese economy buttresses tech giants emerging from three years of Covid restrictions and endless regulatory crackdowns.

Growing enthusiasm for AI since ChatGPT’s sensational public roll-out could also benefit ByteDance, which pioneered algorithms a decade ago to get users hooked on videos and news. Representatives for 42XFund declined to comment. A ByteDance spokesman did not immediately respond to a request for comment.

In the longer term, some investors believe that parts of China’s embattled tech sector may finally get back on track for growth, despite lingering suspicion about Beijing’s intentions for the private sector. Xi Jinping’s government has since last year repeatedly reassured investors and entrepreneurs alike about its pro-business stance.

ByteDance, which gained a foothold in the US by buying TikTok’s predecessor, is one of a handful of Chinese app developers to have hit the big time abroad. That select club includes upstarts like fast-fashion purveyor Shein Group, AliExpress and PDD Holdings’ bargain shopping app Temu.

ByteDance’s marquee service drew advertisers keen on hitting a more youthful demographic. And it has carved out a niche selling goods to millions of social media users via live streams across the world.

That popularity spooked some in Washington. The White House endorsed a bipartisan bill last week that could grant the president authority to ban or force a sale of TikTok – which could deal a major blow to the Chinese firm’s international ambitions.

A ByteDance IPO – the company has explored options including Hong Kong and the US – remains a ways off, given global market volatility. In September last year, the Beijing company offered to buy back US$3 billion of its own shares at a valuation of about US$300 billion, offering a way for existing backers such as Susquehanna International Group and Sequoia Capital to cash in some of their gains.

ByteDance, which is also backed by SoftBank Group Corp and Temasek Holdings, is not in urgent need of cash after TikTok alone generated an estimated US$12 billion of revenue in 2022.