China’s secret weapon in AI race with US? Lots of cheap energy

In the contention against China for AI supremacy, the United States dominates erstwhile it comes to entree to the astir cutting-edge semiconductors.

But erstwhile it comes to powering the immense information centres that tally connected AI chips, China holds the wide advantage.

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That’s due to the fact that information centres, the sprawling computing facilities needed to bid and tally AI models, necessitate immense amounts of energy.

A emblematic information centre tin devour arsenic overmuch energy arsenic 100,000 households, portion next-generation “hyperscale” facilities tin gobble up arsenic overmuch powerfulness arsenic 2 cardinal homes, according to the International Energy Agency (IEA).

China’s entree to an abundant proviso of inexpensive energy places it successful the perfect presumption to conscionable specified colossal vigor demands.

China already generates much than doubly arsenic overmuch energy arsenic the US, a pb that is expected to widen amid an assertive state-led concern successful the country’s vigor grid.

BloombergNEF, a probe provider, estimates that China volition adhd much than six times arsenic overmuch energy procreation capableness arsenic the US implicit the adjacent 5 years.

Much of that extra capacity will be successful the signifier of renewables specified as solar and wind.

In 2025 alone, China accrued its upwind and star powerfulness capableness by much than 430 gigawatts, accounting for much than fractional of the further capableness successful the renewables added globally that year.

Tibetan sheep graze astatine a star workplace successful Hainan prefecture, Qinghai province, China connected July 1, 2025 [File: Ng Han Guan/AP]

A cardinal constituent of China’s AI strategy involves integrating its information centres into its rapidly expanding renewables sector.

Under the “East Data, West Computing” initiative, China’s authorities is concentrating the operation of caller information centres successful the country’s sparsely populated interior, wherever onshore and renewable vigor sources are abundant compared with the heavy built-up eastbound seaboard.

Earlier this month, Beijing announced the commencement of operations astatine the country’s archetypal “large-scale” renewable vigor task to beryllium linked straight to a information centre.

The 500-megawatt upwind and star project, located successful the northwestern Ningxia region, volition powerfulness a unreality information centre operated by China Datang done a “dedicated transmission line”, China’s absorption assemblage for state-owned enterprises said successful a connection connected May 12.

“In the agelong run, the country that tin supply cheap, stable, low-carbon electricity will person a large vantage successful AI infrastructure,” Qiyang Xiong, a PhD campaigner astatine Renmin University of China who specialises in AI and vigor policy, told Al Jazeera.

“China is simply a planetary person successful solar, upwind and ultra-high-voltage transmission,” Xiong said.

“This gives it an vantage successful supplying occidental information centre clusters with ample volumes of comparatively cheap, cleanable electricity.”

Narrowing the gap

For now, the US inactive has the largest information centre footprint by a wide margin.

According to Stanford University’s AI Index, the US had an estimated 5,427 information centres successful 2025, compared with 449 successful China.

The US accounted for 45 percent of the 415 terawatt-hours of energy consumed by information centres successful 2024, followed by China and Europe with 25 percent and 15 percent, respectively, according to the IEA.

In 2026 alone, Silicon Valley’s Amazon, Microsoft, Meta and Alphabet are projected by Morgan Stanley to walk $630bn connected information centres and different AI-related investment, vastly much than Chinese tech giants specified arsenic Alibaba, Tencent and ByteDance.

But arsenic China constructs information centres astatine a blistering gait – its fig of information centre racks grew 30 percent annually from 2016 to 2023, according to the China Academy of Information and Communications Technology – the spread betwixt the superpowers is rapidly narrowing.

Facing US export controls connected top-end Nvidia chips manufactured by the Taiwan Semiconductor Manufacturing Company (TSMC), China has progressively turned to partially state-owned Semiconductor Manufacturing International Corporation (SMIC) to proviso chips designed by section tech firms specified arsenic Huawei.

By 2030, China’s information centre capableness is expected to scope 60 gigawatts, astir treble its existent level, according to an investigation by Rystad Energy, taking up 2.3 percent of the country’s full energy demand.

A logo of China’s Semiconductor Manufacturing International Corporation is seen astatine the China International Semiconductor Expo successful Shanghai, China, connected October 14, 2020 [File: Aly Song/Reuters]

“China’s ample manufacturing basal and little stringent regulatory situation mean that the operation of data centres and supporting vigor infrastructure tin hap acold much rapidly than successful the US,” Leah Fahy, elder economist for China astatine Capital Economics, told Al Jazeera.

“Modular Huawei information centres tin present beryllium constructed successful six months, portion equivalents successful the US instrumentality astatine slightest a year,” Fahy said.

Power grids nether strain

Meanwhile, determination are already signs that the AI rollout successful the US is bumping up against power constraints.

Energy consultancy Wood Mackenzie said earlier this twelvemonth that the limitations of the US vigor grid had resulted successful a 50 percent 4th connected 4th driblet successful caller information centre projects astatine the extremity of 2025.

Technical limitations person been compounded by a increasing backlash against information centres wrong communities crossed the US – driven partially by the strain the facilities spot connected section grids – a situation not faced by China, wherever absorption to the authorities is heavy restricted.

At slightest 36 data centres were blocked or stalled in the US betwixt May 2024 and June 2025, according to Data Center Watch, a probe task by AI information institution 10a Labs.

US tech leaders, including Tesla’s Elon Musk, Nvidia’s Jensen Huang and OpenAI’s Sam Altman, person openly acknowledged China’s borderline successful the vigor domain.

“The limiting origin for AI deployment is fundamentally electrical power,” Musk said successful an interrogation astatine the World Economic Forum successful January.

“Very soon, possibly adjacent aboriginal this year, we’ll beryllium producing much chips than we tin crook connected – but for China. China’s maturation successful energy is tremendous.”

Elon Musk attends the 56th yearly World Economic Forum (WEF) gathering successful Davos, Switzerland, connected January 22, 2026 [File: Denis Balibouse/Reuters]

Advancing AI is present an “electricity occupation arsenic overmuch arsenic a spot problem”, said Howard Yu, manager of the Center for Future Readiness astatine IMD Business School successful Lausanne, Switzerland.

“The winners of this cycle will ain the silicon, the powerfulness contracts, and the cooling water, successful that order, and China has built its strategy astir the input it controls,” Yu told Al Jazeera.

China’s vigor vantage is not without its ain limitations.

Despite Beijing’s propulsion to meld its AI ambitions with the upwind and star resources of its distant occidental regions, astir information centres are inactive located successful and astir eastbound megacities specified arsenic Beijing, Tianjin, Shanghai, Guangzhou and Shenzhen.

“These places besides look powerfulness proviso difficulties and person introduced restrictions connected caller information centres,” Anders Hove, a elder probe chap astatine the Oxford Institute for Energy Studies, told Al Jazeera.

Hove added that China’s powerfulness grid besides suffers from a precocious grade of fragmentation that prevents the seamless travel of energy betwixt regions.

“China’s powerfulness strategy is organised and dispatched chiefly astatine the provincial level, with transmission corridors acting chiefly arsenic one-way powerfulness flows,” Hove said.

“Though the cardinal authorities has called for determination wholesale markets and much granular trading intervals, this is proceeding slowly,” helium added.

Chinese Premier Li Keqiang (3rd R) visits Tencent’s information centre successful Guiyang, Guizhou province, China, connected July 7, 2020 [File: cnsphoto via Reuters]

Quality control

Though rapid, China’s information centre rollout has besides faced prime issues, said Kyle Chan, a probe chap astatine the Brookings Institution who specialises successful Chinese tech and concern policy.

“They are trying to physique heterogeneous spot clusters that radical unneurotic antithetic hardware systems. This makes it much challenging to tally AI workloads,” Chan told Al Jazeera.

“There person been issues with the physique prime of immoderate Chinese information centres, peculiarly erstwhile the developer does not person due acquisition with specified a analyzable project,” Chan said.

China has besides has immoderate mode to spell to constrictive the spread betwixt information centre capableness and utilisation, said IMD Business School’s Yu.

“Beijing’s ain estimates enactment it astatine 20 to 30 percent, and adjacent SMIC’s main has warned the caller capableness could beryllium idle,” Yu said.

“One mode to framework the full race: the US has the chips and is abbreviated connected power, portion China has the powerfulness and is abbreviated connected chips. Each is sprinting to hole its ain bottleneck.”