In a dramatic turn in the saga of TikTok’s U.S. operations, the new deal brokered under former President Donald Trump could allow ByteDance, TikTok’s Chinese parent company, to retain around 50 % of the profits generated from TikTok U.S., despite ceding majority control to American investors.
This profit-sharing model represents a striking balance: satisfying U.S. concerns over Chinese ownership and influence, while still granting ByteDance a major stake in future U.S. earnings. As the details of the agreement filter out, questions remain about algorithm control, national security, and how this blended structure aligns with U.S. law.
The Push for TikTok’s Divestiture
Legal and Political Pressure
In 2024, the U.S. Congress passed the Protecting Americans from Foreign Adversary Controlled Applications Act (PAFACA), targeting apps under foreign control — explicitly including ByteDance and TikTok. Under this law, TikTok would have to divest its U.S. operations or face a ban.
As the deadline loomed (January 2025), the pressure intensified. ByteDance had to either find a credible U.S. buyer or shut down TikTok’s presence in the U.S. market.
Trump’s Reversal and Negotiated Deal
When Trump returned to office in 2025, he took a different tack. Instead of enforcing a ban, his administration began negotiating a complex sale or restructuring that would allow TikTok U.S. to continue operating under new ownership.
On September 25, Trump signed an executive order stating the planned sale of TikTok U.S. meets U.S. national security requirements, pegging the valuation at $14 billion. Vice President JD Vance confirmed that valuation and said the algorithm would be “retrained” and monitored by the new U.S. entity.
However, analysts and insiders have questioned the valuation’s realism hinting that the real value lies not in the equity but in the profit-sharing and algorithm licensing terms.
Key Terms of the Deal
Ownership Structure & Equity
Under the proposed structure:
- American investors (including Oracle, Silver Lake, MGX) would control a majority stake in the new TikTok U.S. venture.
- ByteDance itself would retain less than 20% equity — constrained by U.S. law limiting Chinese ownership in critical tech assets.
- The valuation of $14 billion applies to the U.S. entity being formed under this arrangement.
Profit Sharing, Licensing & Algorithm Revenue
Despite the reduced equity, ByteDance would still command a significant share via:
- Licensing fees for the algorithm — TikTok U.S. would pay ByteDance to license the recommendation algorithm or related technology.
- Profit share relative to equity stake — ByteDance’s minority stake would entitle it to a proportional share of residual profits.
The combined effect: ByteDance expects to collect about 50 % of U.S. operation profits overall, even though their direct equity is under 20%.
In effect, ByteDance transforms from owner into a dual-revenue partner benefiting from performance without day-to-day control.
Timing & Implementation
The deal must be finalized within 120 days of the executive order. Trump’s executive order also delayed enforcement of the 2024 PAFACA law temporarily to allow this restructuring to proceed.
The algorithm retraining and oversight mechanisms are yet to be fully disclosed indicating that key technical and regulatory details remain to be ironed out.
Who Are the Key Players?
ByteDance
ByteDance stands at the center of this transformation. Although no longer a controlling shareholder in TikTok U.S., the company positions itself to reap financial gains through licensing and profit share.
ByteDance’s decision to accept minority equity signals a tactical retreat — trading control for guaranteed revenue in one of its most lucrative markets.
American Investors & Consortium
The buyer side includes high-profile names:
- Oracle — will likely take a leading role in technology oversight.
- Silver Lake — private equity firm with experience in tech deals.
- MGX — linked to the Abu Dhabi royal family, taking about 15% stake.
- Other institutional investors and strategic partners are expected to fill out the remaining ownership.
This mix is intended to align the operation more closely with U.S. interests — particularly around data security, governance, and regulatory compliance.
Valuation Concerns & Fire-Sale Claims
Many analysts view the $14 billion price tag as deeply undervalued relative to TikTok’s U.S. earnings potential.
The paradox emerges: How can a company commanding half the profits be worth just $14 billion? The answer likely lies in the constrained equity share and limited control rights built into the structure.
Some commentators call it a “fire sale” engineered to benefit political allies and U.S. firms.
Algorithm Control & National Security
The algorithm is the “secret sauce” behind TikTok’s success — determining content recommendations, engagement, and user retention. The deal’s framework suggests that the U.S. entity will retrain or reengineer the algorithm under American oversight.
However, many experts worry whether retained ties to ByteDance (via licensing and technical agreements) could still permit indirect influence or hidden dependencies.
If any control remains (or reverts) to engineers or systems in China, the national security goals could be undermined.
Legal & Regulatory Hurdles
While the executive order delays enforcement of PAFACA, it does not eliminate legal scrutiny. U.S. lawmakers, regulatory bodies, and oversight agencies will likely examine whether the new structure truly severs foreign control.
Rep. John Moolenaar, Chair of the House China Select Committee, has already demanded briefings on the deal, particularly around compliance, oversight, and transparency.
Additionally, critics argue this approach could weaken the underlying intent of PAFACA by contriving a loophole: profit sharing without operational control.
Public & Market Reaction
- Investors and tech watchers are closely watching how the terms unfold — especially algorithm licensing, profit split, and control clauses.
- Some in Silicon Valley question whether U.S. firms got a bargain, acquiring valuable attention and advertising infrastructure at a steep discount.
- Among privacy advocates, concerns linger that even with U.S. oversight, data flows and infrastructure dependencies could pose risks.
- In China, the government has thus far remained cautious, signaling respect for market negotiations but refusing to formally endorse the deal yet.
Timeline: Key Milestones & Next Steps
| Step / Event | Date / Deadline | Notes |
|---|---|---|
| PAFACA signed into law | April 24, 2024 | Mandated divestiture of apps under foreign control (like ByteDance) or ban them. |
| TikTok & ByteDance legal responses | 2024–early 2025 | Lawsuits, pushback against enforceability, temporary shutdowns |
| TikTok U.S. removed from app stores | January 18, 2025 | As enforcement loomed under PAFACA; service partially restored Jan 19 |
| Trump’s executive orders and deferrals | 2025 | Multiple delays on enforcement, giving room to negotiate |
| Trump signs executive order approving sale | September 25, 2025 | Declares the sale meets national security requirements at $14B valuation |
| Deal finalization window | 120 days from order | Must iron out profit sharing, algorithm oversight, governance |
Beyond these steps, attention will focus on: How U.S. regulators condition approval (privacy safeguards, transparency, auditing). Technical implementation: migration of algorithm, codebase, data separation. Monitoring mechanisms to ensure ByteDance cannot reassert control
Winners
ByteDance (financially): Although losing control, ByteDance secures a consistent revenue stream from U.S. operations via licensing and profit sharing. U.S. Investors: Getting access to one of the most potent attention platforms in the world, under favorable terms. Trump administration (politically): Can claim a “deal that protects national security while preserving TikTok for Americans. TikTok U.S. users and creators: Continuity of platform access, fewer disruptions in the short term.
Risks & Pitfalls
Algorithm influence backdoor: The licensing link to ByteDance might allow hidden influence or dependency, undermining the structural separation. Regulatory backlash: Congress or courts may challenge whether this arrangement truly meets the letter of PAFACA or national security requirements. Valuation discrepancy: If TikTok U.S. revenues grow much faster than projected, American investors might feel short-changed. Operational complexity: Separating infrastructure, data pipelines, and control from the existing global TikTok system is highly complex and sensitive. Political volatility: Future administrations may reverse or re-legislate, impacting enforceability and stability.
Broader Implications
For U.S.–China Tech Rivalry
This deal becomes a landmark example in tech geopolitics: how much influence a foreign parent can retain without formal control. It may set precedent in future cases involving Chinese firms and U.S. national security scrutiny.
For Big Tech & Platform Governance
The outcome may reshape how global platforms balance control, licensing, and governance across jurisdictions. We may see more models where core technology is licensed rather than fully owned.
For Content, Creators & Users
Separating the U.S. algorithm could lead to divergence in content feeds across countries, affecting which content becomes visible or viral in the U.S. versus other geographies.
The Trump-brokered TikTok U.S. deal is far more than a simple sale of an app division. It is a complex hybrid structure that allows ByteDance to maintain significant financial upside while handing operational control to American investors.
If executed carefully and monitored strictly, this agreement could offer a middle ground between national security concerns and preserving the platform’s utility. But the devil lies in the details — particularly algorithm control, licensing terms, and enforcement safeguards.
In the coming months, all eyes will be on how regulators, courts, and the parties involved translate this legal framework into technical, operational reality. The success or failure of this deal will resonate far beyond TikTok — shaping global norms on data governance, digital sovereignty, and the boundaries of foreign influence in tech.
