Abu Dhabi AI firm G42 has acquired a stake in ByteDance, the parent company of TikTok, at a valuation of approximately $220 billion.

The deal, in which G42 bought a $100 million-plus stake from existing investors through its 42XFund, is a significant discount to the $300 billion valuation set by ByteDance during a recent share buyback program. Another fund bought into ByteDance at $225 billion shortly after, according to unnamed sources.

ByteDance's valuation has been volatile due to uncertainty over the future of TikTok. Lawmakers have accused the app of being a national security threat and suggested it could be outlawed. TikTok's leadership has discussed the possibility of separating from its Chinese parent, although that is a last resort.

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Despite the regulatory uncertainty, some investors believe that parts of China’s tech sector may finally get back on track for growth. ByteDance, which pioneered algorithms to get users hooked on videos and news, is one of a handful of Chinese app developers to have hit the big time abroad.

Its marquee service, TikTok, drew advertisers keen on hitting a more youthful demographic and has earned the company an estimated $12 billion in revenue in 2022.

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ByteDance’s gross merchandise volume in China grew 76% to $208 billion in 2022, according to a report by The Information, citing unknown sources, with knowledge of the internal data. Consumers in China reportedly spent $208 billion (1.41 trillion yuan) buying things on ByteDance’s Douyin video app,…

An IPO for ByteDance remains a way off given global market volatility. The company has explored options including Hong Kong and the US. It is backed by SoftBank Group and Temasek Holdings, and the recent deal with G42 could reflect optimism about its longer-term potential.