In recent years, China experienced a surge in AI infrastructure development as local governments and corporations raced to capitalize on the artificial intelligence craze. Initially driven by the promise of cutting-edge technology and economic growth, this boom led to over 500 new data center projects being announced across the country. However, as demand for high-performance GPUs like Nvidia's H100 waned and alternative models such as DeepSeek gained prominence, the industry began facing significant challenges. Many newly constructed facilities now remain underutilized or abandoned, with investors scrambling to unload their assets at below-market rates. This shift has raised questions about the sustainability of China’s approach to AI infrastructure investment.

When global attention turned to artificial intelligence following the release of ChatGPT in late 2022, China responded swiftly by prioritizing AI infrastructure as a national focus. Local governments were encouraged to develop so-called "smart computing centers," leading to partnerships between major corporations—some unrelated to AI—and regional authorities. These collaborations often lacked technical expertise, resulting in rushed constructions that failed to meet industry standards. According to experts, only a fraction of companies involved in developing large language models continued investing heavily by year-end 2024, while others pivoted due to rising competition from more efficient open-source alternatives.

The decline in GPU rental profitability further exacerbated these issues. Previously fetching exorbitant prices on the black market, Nvidia H100 chips saw their value plummet as supply outpaced demand. Data centers located far from tech hubs struggled to attract clients because low-latency requirements became crucial for real-time reasoning tasks rather than traditional model training. Moreover, some operators exploited government incentives without genuinely contributing to AI advancements, using subsidies for purposes unrelated to computational workloads.

Despite these setbacks, China's central government remains committed to advancing its AI capabilities. Major tech firms such as Alibaba Group and ByteDance have pledged substantial investments in cloud computing and hardware infrastructure, aligning with national priorities. Meanwhile, international players like OpenAI are also expanding their own infrastructures through initiatives like Stargate. Analysts believe that despite current inefficiencies, China will continue consolidating its resources to achieve long-term strategic goals in AI technology.

As the dust settles from the initial frenzy, some insiders express skepticism about whether endless expansion truly guarantees progress. Former data center project manager Fang Cunbao recently exited the field altogether, citing chaotic market conditions dominated by policy exploitation rather than genuine innovation. Looking ahead, experts suggest that successful deployment of AI technologies hinges less on physical infrastructure and more on thoughtful planning and execution strategies tailored to evolving demands within the sector.