Major Chinese technology companies, including Alibaba, Tencent, and Baidu, have significantly ramped up investments in artificial intelligence infrastructure in spite of US-imposed sanctions aimed at limiting China’s tech progress. Collectively, these companies invested Rmb50bn ($7bn) in AI infrastructure in the first half of the year, a stark increase from Rmb23bn in the same period last year. The focus has primarily been on acquiring processors and infrastructure to train large language models.
Alibaba’s Investment in AI
Alibaba has taken a prominent role in the surge, with its capital expenditures hitting Rmb23bn in the first half, representing a 123% increase year-over-year. CEO Eddie Wu highlighted the company’s dedication to investing in research and development and AI infrastructure to cater to the increasing needs of their clients. Alibaba is buying processors to train its Tongyi AI models while offering computing power to other businesses. Wu noted that the servers are fully utilized almost immediately after deployment, showing substantial returns on their investments.
ByteDance’s AI Strategy
ByteDance, the parent company of TikTok, has also increased its AI-related investments, supported by a sizable cash reserve exceeding $50bn. Being privately held, ByteDance operates with some freedom from investor scrutiny, allowing it to make considerable investments in AI. ByteDance is a notable customer of Nvidia’s H20 processors, which are compliant with US export restrictions. Additionally, it has been investing heavily in data centers in both China and Malaysia.
Tencent’s Escalating AI Investments
Tencent has reported a notable 176% rise in capital expenditures, reaching Rmb23bn for the first half of the year. The company has been investing in GPU and CPU servers to support its cloud services. However, Tencent’s Chief Strategy Officer James Mitchell mentioned that the scale of AI investments in China is smaller compared to the US, where start-ups often benefit from much larger funding rounds.
Baidu’s Moderate AI Spending
Baidu has taken a more cautious approach with its AI investments, recording capital expenditures of Rmb4.2bn in the first half, which is a modest 4% increase from the previous year. Nonetheless, Baidu still plays a significant role in China’s AI sector.
US export controls have limited access to Nvidia’s top AI processors, such as the H100 and the forthcoming Blackwell series. However, Chinese firms have managed to acquire Nvidia’s H20 processors, which meet US regulations regarding export controls. Analysts predict that Nvidia will ship over a million of these processors to Chinese tech firms in the next several months, each priced between $12,000 and $13,000.
Despite the growth in AI spending by Chinese tech firms, their capital expenditures are still behind those of American tech giants. In the first half of the year, Alphabet, Amazon, Meta, and Microsoft collectively spent $106bn, with plans for continued investments ahead.
Last Updated on November 7, 2024 3:09 pm CET
