China’s cloud industry is rapidly evolving due to a growing demand for artificial intelligence (AI). In late 2024, spending on cloud infrastructure in Mainland China rose to $11.1 billion, which is a 14% increase from the previous year. Over the entire year, spending increased by 13%, reaching $40 billion. This highlights AI as a major factor in the growth of the cloud industry.

A significant contributor to this change is a company called DeepSeek. This Chinese AI firm gained global attention when it launched its new AI model, DeepSeek R1, in early 2025. This model delivers high-level performance similar to GPT-4 but at a much lower cost. As a result, many companies in China are adopting AI on a large scale to take advantage of its benefits while managing costs effectively.

There is an increasing demand for AI-powered cloud services, but issues still exist on the supply side. Large cloud operators such as Alibaba Cloud, Huawei Cloud, and Tencent Cloud are investing heavily to enhance their AI capabilities. In February 2025, Alibaba, for instance, said that it would be spending $52.6 billion on cloud computing and AI for the next three years, exceeding all its combined expenditure in these fields over the last decade. Likewise, Tencent raised its investment by 421% in late 2024 to develop technology related to AI.

With AI gaining popularity, competition in the cloud services sector is increasing. Alibaba Cloud is leading the market with a 36% share by aggressively expanding its AI services. Huawei Cloud, the second-largest provider, saw its revenue grow by 22% in late 2024. It is also extending AI services into sectors like finance, railways, and weather forecasting. Tencent Cloud maintains a 15% market share and is focusing on improving its AI skills. In February 2025, it introduced the T1 model, designed to enhance data processing speeds and efficiency, especially for long texts, underlining its focus on AI.

To sum up, China’s cloud computing industry is changing quickly, with AI acting as a major driver and change agent. With substantial investments in AI infrastructure and widespread adoption of advanced models by companies, the cloud industry is undergoing significant transformation. This shift is expected to impact the global AI landscape for the foreseeable future.