Gobi Bytes
China is making a substantial push to develop its artificial intelligence capabilities, with ambitious plans to establish a network of data centres on the edge of the Gobi Desert in Xinjiang. Recent analysis of investment approvals and tender documents indicates an intention to integrate over 115,000 advanced Nvidia AI chips across approximately three dozen facilities in the country's western regions.
Yiwu county in Xinjiang is touted to host a substantial portion of these processors within a single complex. Yiwu's location is strategically advantageous. The region, particularly the Hami area, offers abundant wind, solar, and coal energy, providing an affordable and consistent power supply essential for energy-intensive data centres. The arid, high-altitude climate also aids in managing the substantial heat generated by numerous server racks. Local governments are supporting these projects with incentives such as free electricity and various operational grants, underscoring the national importance placed on developing these computing power corridors.
The strategic importance of these data centres is further highlighted by the interest from Chinese AI startups, such as DeepSeek. Industry experts suggest the gap between leading US and Chinese AI labs is narrowing. A notable factor in this progress is the open-source nature of many prominent Chinese AI models. This approach facilitates faster global dissemination and is seen by Beijing as a source of technological "soft power." DeepSeek, for instance, has reportedly trained its R1 model using less advanced Nvidia chips, showcasing an ability to achieve impressive results with available resources, and has expressed interest in collaborating with these Xinjiang data centre projects.
However, a critical challenge looms: acquiring Nvidia's high-end H100 and H200 AI chips, which are considered vital for advanced AI applications. The US government imposed sweeping restrictions on the sale of these leading-edge semiconductors to China in 2022. The Chinese documents outlining these projects do not specify how the involved companies intend to obtain these restricted chips, as the necessary US government licenses have not been granted.
The ongoing construction in Xinjiang indicates China's unwavering commitment to advancing its AI capabilities, even amidst significant US export controls. While the projected scale of the Xinjiang complex would remain smaller than some US AI infrastructures, its completion could represent a considerable increase in China's overall computing power, with the control over advanced AI chips at its very core.
If you would like to receive The Daily Update to your inbox, please email markets@epicip.com or click the link below.