Now, his WeChat feed and industry group chats tell a special story. Traders are more discreet of their dealings, and costs have come back right down to earth. Meanwhile, two data center projects Li is aware of are struggling to secure further funding from investors who anticipate poor returns, forcing project results in dump surplus GPUs. “It looks like everyone seems to be selling, but few are buying,” he says.
Just months ago, a boom in data center construction was at its height, fueled by each government and personal investors. Nevertheless, many newly built facilities at the moment are sitting empty. Based on people on the bottom who spoke to —including contractors, an executive at a GPU server company, and project managers—many of the corporations running these data centers are struggling to remain afloat. The local Chinese outlets and report that as much as 80% of China’s newly built computing resources remain unused.
Renting out GPUs to corporations that need them for training AI models—the essential business model for the brand new wave of knowledge centers—was once seen as a certainty. But with the rise of DeepSeek and a sudden change within the economics around AI, the industry is faltering.
“The growing pain China’s AI industry goes through is essentially a results of inexperienced players—corporations and native governments—jumping on the hype train, constructing facilities that aren’t optimal for today’s need,” says Jimmy Goodrich, senior advisor for technology to the RAND Corporation.
The upshot is that projects are failing, energy is being wasted, and data centers have change into “distressed assets” whose investors are keen to unload them at below-market rates. The situation may eventually prompt government intervention, he says: “The Chinese government is more likely to step in, take over, and hand them off to more capable operators.”
A chaotic constructing boom
When ChatGPT exploded onto the scene in late 2022, the response in China was swift. The central government designated AI infrastructure as a national priority, urging local governments to speed up the event of so-called smart computing centers—a term coined to explain AI-focused data centers.
In 2023 and 2024, over 500 recent data center projects were announced all over the place from Inner Mongolia to Guangdong, in response to KZ Consulting, a market research firm. Based on the China Communications Industry Association Data Center Committee, a state-affiliated industry association, at the least 150 of the newly built data centers were finished and running by the tip of 2024. State-owned enterprises, publicly traded firms, and state-affiliated funds lined up to take a position in them, hoping to position themselves as AI front-runners. Local governments heavily promoted them within the hope they’d stimulate the economy and establish their region as a key AI hub.
