Capital expenditure on artificial intelligence (AI) in China is forecast to reach CNY600 billion to CNTY700 billion this year, according to a Bank of America (BofA) report, as China and the United States race for primacy in the vital technology. That would represent as much as a 48% overall growth this year for China’s AI capex from 2024, BofA Securities’ co-head of China equity research Matty Zhao, who also heads Asia-Pacific basic materials, oil and gas research at BofA Global Research, said. Government investment is expected to account for up to CNY400 billion of total AI spending. China’s major internet companies are projected to contribute as much as CNY172 billion. Spending attributed by BofA to the country’s large telecommunications network operators and special-purpose bonds makes up the rest of the forecast AI capex.
The predicted surge in China’s AI spending in 2025 reflects the heightened enthusiasm for the technology on the back of DeepSeek’s success. The Hangzhou-based start-up generated worldwide attention earlier this year after consecutively releasing two advanced open-source AI models, V3 and R1, developed at a fraction of the cost and computing power that major tech firms typically require for large language model (LLM) projects. Following DeepSeek’s accomplishment, Chinese Big Tech companies, including Alibaba and Tencent, announced plans for increased AI investments, BofA’s Zhao said. Alibaba in February unveiled its own CNY380 billion capex plan for computing resources and AI infrastructure over the next three years. Tencent also announced efforts to ramp up AI investment, after the company’s fourth-quarter 2024 capex nearly quadrupled year-on-year to CNY36.6 billion.
The Chinese government, meanwhile, has pushed for the buildout of new AI data centers. China is expected to step up its AI infrastructure development to match the U.S. government’s commitment to the Stargate Project to plough up to USD500 billion over the next four years into an advanced network of data centers in the U.S. While U.S. spending on AI is geared heavily towards information technology hardware such as semiconductors, a larger portion of China’s AI capex will go to building data centers and the energy infrastructure to support those facilities. Zhao added that energy resources represent an advantage for China. To fuel the country’s growing AI sector, Beijing earlier this month released an action plan that coordinates the development of data centers with green energy infrastructure in certain areas to meet the power requirements of these high-performance computing facilities, the South China Morning Post reports.
