China's AI Data Center Boom Faces Crisis as Facilities Sit Idle

Shifting market demands and poor planning have left much of China's AI infrastructure underutilized, but government and corporate investments persist.

• Over 80% of China's AI computing resources are reportedly idle, with many facilities struggling to attract clients or remain operational.
• The rise of cost-efficient reasoning models like DeepSeek's R1 has shifted demand from training-focused hardware to inference-driven applications, rendering many data centers obsolete.
• Poor planning and a rush to capitalize on government subsidies led to the construction of technically outdated and underutilized facilities.
• GPU rental prices have plummeted due to oversupply, with some operators shutting down facilities entirely to avoid further financial losses.
• Despite the setbacks, the Chinese government and major tech firms like Alibaba and ByteDance continue to invest heavily in AI infrastructure, viewing the challenges as necessary for long-term competitiveness.

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