ByteDance is in advanced talks to sell its gaming division Shanghai Moonton Technology Co. to Saudi Arabia's Savvy Games Group in a deal valued at 6 billion to 7 billion, according to people familiar with the matter. The transaction, which could close this quarter, would mark China's largest domestic merger and acquisition of 2026 and deliver ByteDance a profit exceeding $2 billion (14 billion yuan) on its 2021 acquisition.

The sale represents a decisive retreat from ByteDance's gaming ambitions as the company pivots resources toward artificial intelligence development. Moonton, developer of the hit mobile game "Mobile Legends: Bang Bang," was acquired by ByteDance for $4 billion five years ago as part of an aggressive push to challenge Tencent and NetEase in the gaming market.

The transaction comes as ByteDance intensifies its AI investments, recently purchasing land in Beijing's Zhongguancun district for 2.8 billion yuan ($387 million) to establish headquarters for its Seed AI research team. The timing underscores a broader strategic shift among Chinese internet giants prioritizing AI over traditional content businesses.

Savvy Games Group, an investment vehicle of Saudi Arabia's Public Investment Fund, would acquire not only Moonton but also ByteDance's Shanghai studio behind the tactical shooter "Area F2" and the Guangzhou-based Lighthouse studio, according to sources. Moonton's existing management team is expected to remain in place.

Strategic Withdrawal From Gaming

ByteDance's gaming retreat follows years of disappointing results despite substantial investments. The company launched its gaming brand Nuverse in 2021 alongside the Moonton acquisition, aiming to build a global gaming powerhouse. However, the unit struggled to produce hits beyond "Mobile Legends," which generates 86% of Moonton's revenue.

While "Mobile Legends" dominates Southeast Asian markets with over 1.5 billion cumulative downloads and 110 million monthly active users, it failed to gain traction in Western markets or challenge Tencent's "Honor of Kings" domestically. The game consistently ranks outside the top 100 on iOS revenue charts in the United States and Europe.

ByteDance began scaling back gaming operations in late 2023, shuttering its Shanghai 101 studio and other mid-core gaming teams. The company shifted focus toward casual games and user-generated content, signaling diminished appetite for costly AAA game development. The Moonton sale represents the culmination of this strategic pullback.

The transaction would leave ByteDance with limited gaming assets, primarily casual titles integrated into its Douyin and TikTok platforms. Some game studios will remain with ByteDance after the sale, though their specific identities were not disclosed.

Moonton's Regional Dominance

Moonton has established itself as a dominant force in emerging markets since its 2014 founding by former Tencent employees Xu Zhenhua and Yuan Jing. The company deliberately avoided China's saturated domestic market, instead targeting Southeast Asia, Latin America, and other regions with lower mobile gaming penetration.

"Mobile Legends: Bang Bang" launched in 2016 and quickly became the region's leading multiplayer online battle arena title, often described as Southeast Asia's answer to "Honor of Kings." The game ranks among the top 10 most popular titles in over 80 countries and regions.

Beyond gaming, Moonton invested early in esports infrastructure, becoming the first Chinese company to establish a professional competitive gaming ecosystem overseas starting in 2017. The company employs over 2,000 people with offices across Southeast Asia and Latin America.

Moonton's regional focus proved prescient, as the company captured markets before larger competitors established dominance. However, this geographic concentration also created vulnerability, with revenue heavily dependent on a single title in markets with lower average revenue per user than developed economies.

AI Takes Priority

The Moonton sale frees capital and management attention for ByteDance's AI initiatives, which CEO Liang Rubo described as "the most important historical opportunity window" during a January company-wide meeting. ByteDance is consolidating resources around its Seed AI research division, which employs over 1,000 people and reports directly to Liang.

Seed is led by Wu Yonghui, a former Google Fellow who contributed to Gemini development before joining ByteDance in early 2025. The division recently released Doubao 2.0, a large language model optimized for production environments, and Seedance 2.0, a video generation model that gained widespread attention in China.

ByteDance founder Zhang Yiming, who stepped back from day-to-day operations, regularly participates in Seed team technical reviews, according to industry sources. The unit receives preferential resource allocation within ByteDance as the company races to compete with rivals including Tencent, Alibaba, and Baidu in AI development.

The company's AI chatbot Doubao is preparing for heightened competition during the Lunar New Year period, with some regional teams relocating to Beijing for holiday support operations. Chinese internet companies are distributing billions of yuan in subsidies to attract users to their AI assistants, with Tencent, Alibaba, and Baidu all launching promotional campaigns.

ByteDance's land purchase in Haidian district is widely believed to be designated for Seed team facilities, providing dedicated infrastructure for AI research and development. The investment signals long-term commitment to AI as the company's primary growth engine, even as it divests legacy content businesses like gaming.