China built hundreds of AI data centers to catch the AI boom. Now many stand unused - MIT

Many of China’s AI datacenters, built out to support the country’s AI boom, stand unused, according to the MIT Technology Review.

In late 2023 into 2024, the country rapidly expanded its data center capacity, fueled by both generous government support and private investors seeking to capitalize on the AI craze. Due to the massive computing costs of training AI models, the data center business model–renting out GPUs to companies for AI purposes–was more attractive.

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However, after China’s own DeepSeek demonstrated to the world the limitations of throwing around massive computational resources (and roiling markets in the process), the demand for such datacenters has dwindled.

“The growing pain China’s AI industry is going through is largely a result of inexperienced players—corporations and local governments—jumping on the hype train, building facilities that aren’t optimal for today’s need,” says Jimmy Goodrich, senior advisor for technology to the RAND Corporation. 

China’s government has still pushed AI projects to promote self-reliance and independence from foreign AI hardware, and the domestic AI industry has continued to grow, but in the meantime many of the datacenters built out will remain in limbo until either the government or other investors take charge of the facilities for other purposes.

Despite the underutilization of data centers, China’s central government is still throwing its weight behind a push for AI infrastructure. In early 2025, it convened an AI industry symposium, emphasizing the importance of self-reliance in this technology. 

Major Chinese tech companies are taking note, making investments aligning with this national priority. Alibaba Group announced plans to invest over $50 billion in cloud computing and AI hardware infrastructure over the next three years, while ByteDance plans to invest around $20 billion in GPUs and data centers.

In the meantime, companies in the US are doing likewise. Major tech firms including OpenAI, Softbank, and Oracle have teamed up to commit to the Stargate initiative, which plans to invest up to $500 billion over the next four years to build advanced data centers and computing infrastructure. ​Given the AI competition between the two countries, experts say that China is unlikely to scale back its efforts. “If generative AI is going to be the killer technology, infrastructure is going to be the determinant of success,”  says Goodrich, the tech policy advisor to RAND.

“The Chinese central government will likely see [underused data centers] as a necessary evil to develop an important capability, a growing pain of sorts. You have the failed projects and distressed assets, and the state will consolidate and clean it up. They see the end, not the means,” Goodrich says.

Demand remains strong for Nvidia chips, and especially the H20 chip, which was custom-designed for the Chinese market. One industry source, who requested not to be identified under his company policy, confirmed that the H20, a lighter, faster model optimized for AI inference, is currently the most popular Nvidia chip, followed by the H100, which continues to flow steadily into China even though sales are officially restricted by US sanctions. Some of the new demand is driven by companies deploying their own versions of DeepSeek’s open-source models.