Beijing Invests $295 Billion in AI, Excluding Nvidia and AMD

A Colossal Investment for AI in China

China is set to make a massive investment in artificial intelligence, with a plan of 2 trillion yuan, approximately 295 billion dollars, over the next five years. This program, reported by Bloomberg, aims to build a vast national network of interconnected data centers. The National Development and Reform Commission is behind this ambitious project.

State-owned enterprises such as China Mobile and China Telecom will be responsible for operating the majority of these data centers. A notable aspect of this plan is that 80% of the technologies, including AI chips, must come from domestic suppliers like Huawei, thereby excluding American giants like Nvidia and AMD.

The funding for this project will primarily come from long-term government bonds and state investment funds, supplemented by bank loans and private capital. This plan is part of the "Six Networks" program, which includes critical infrastructures such as water, electricity, and computing capacity. The goal is to grow the AI industry in China to achieve a total volume of over 10 trillion yuan.

An Aggressive Strategy to Dominate AI

This investment represents Beijing's most ambitious effort to establish a solid foundation for AI development in China. By 2028, the dispersed data centers are expected to be connected into a coherent network. Including energy infrastructures, the total investment could reach at least 5 trillion yuan.

In comparison, American tech giants like Meta and Microsoft are planning AI expenditures of around 725 billion dollars by 2026. However, the construction costs of data centers in China are lower, thanks to reduced labor and construction costs. The figure of 2 trillion yuan also does not include private spending by companies like Alibaba and Tencent.

Recently, nine Chinese AI chips from Huawei, Alibaba, Shanghai Biren Technology, and others passed a government security evaluation. This paves the way for their use in security-sensitive sectors. According to Bloomberg Intelligence, the Chinese economy as a whole, rather than specific private companies, is expected to benefit the most from this plan, with Huawei being the primary beneficiary.

Taiwan Tightens Its Export Controls on Chips

Alongside China's expansion, Taiwan is considering tightening its controls on the export of AI chips to China. Currently, unauthorized export of these chips is not considered a crime. However, as part of trade negotiations with the United States, Taipei may restrict sales to all Chinese customers exceeding a certain computing power threshold, not just to blacklisted companies like Huawei.

In May, Taiwanese authorities arrested suspects for smuggling chips but could only charge them with document fraud. Investigators suspect that Nvidia servers were diverted from Japan to Hong Kong. This new legislation would allow Taiwan to pursue the smuggling of AI chips to China as a crime for the first time.