Well, China was one of the more notable nations to have built up an AI infrastructure rapidly since the technology's inception, but it looks like the "front-running" hasn't worked out for them.
China Is Reportedly Said To Have 80% of Its AI Computing Resources Sitting Idle, Credited To Billions In Unnecessary Investment
There's no doubt that China is currently involved in a technological war with the US, and with AI coming into play, the nation decided not to hold back and instead announced massive investments in the technology to gain superiority. However, this move is now costing the nation a lot, as, according to a report by MIT Technology Review, the data center construction boom in China has now faded, resulting in the industry witnessing a massive slowdown in the economics around AI. Has China's "billions of yuan" in data center investment worked out for them?
The report quotes a local data center project manager, who claims that "AI GPU" traders, who once flaunted off when they acquired NVIDIA's cutting-edge accelerators, are now selling off their inventory at "down-to-earth" prices since the demand from domestic markets is far too low. Moreover, data center projects are finding it challenging to secure investment, mainly because the industry doesn't see AI ventures as profitable.
Apart from this, it is claimed that more than 80% of China's AI computing resources are idle, and companies based around the data center hype are finding it difficult to "stay afloat." To top it all off, with the release of DeepSeek, the AI economics of the domestic markets shifted rapidly, and a perception has been created that the technology doesn't need high financial resources, which is why investors are now offloading data centers at prices far beyond the market rates, just to stay financially relevant.
Now, the reason why China saw a massive AI boom, apart from the global hype, is that the local economic leaders saw AI infrastructure as the next place of "financial stimulus," given that regional real estate and internet industries saw a massive decline in interest. So ultimately, major investors jumped onto the bandwagon, hoping to capitalize on "short-term" profits by boosting stock prices; however, many of these investors found themselves in a mud-pit by apparently FOMO'ing into the hype, which is why the development of AI infrastructure in the nation has seen a slowdown.
This case isn't just for China alone, since global tech leaders, notably Microsoft, are also pulling out of data center leases as a "strategic" move to adjust infrastructure. While this certainly doesn't indicate that the AI bubble has popped, it does show that investor sentiment doesn't favor the "long-ball" game with AI.
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