Chart of the Month: China’s Hidden AI Advantage

China’s Hidden AI Advantage

Chinese manufacturers are key suppliers of components required for data centres, electricity networks and AI infrastructure. Source: Gavekal Technologies / Macrobond.

Artificial Intelligence is often viewed through the lens of software companies, advanced semiconductors and frontier AI models. Yet one of the most underappreciated consequences of the AI revolution is the unprecedented demand for physical infrastructure.

As AI adoption accelerates and data centres expand around the world, the beneficiaries extend far beyond the developers of AI models themselves. Increasing computing requirements are creating significant demand for electrical equipment, networking components, cooling systems, batteries and energy infrastructure. This month’s Chart of the Month highlights an important investment theme: the global AI boom is creating substantial opportunities for Chinese manufacturers positioned across the infrastructure value chain.

The Infrastructure Behind Artificial Intelligence

The construction of AI-ready data centres requires enormous quantities of equipment and industrial inputs. Power infrastructure, cooling technologies, networking components, printed circuit boards, batteries, industrial automation systems and precision manufacturing equipment all play a critical role in supporting next-generation computing capacity.

Many of these segments are areas where Chinese companies have developed significant production capacity and global market share. As a result, even if China does not dominate the most advanced AI models, it is well positioned to capture value from the infrastructure buildout required to support the AI revolution.

Financial Markets Are Recognising the Opportunity

The scale of this opportunity is reflected in current investment plans.

Industry estimates suggest that global spending on AI-related infrastructure will reach hundreds of billions of dollars in the coming years as major technology companies continue to invest aggressively in computing capacity. Companies such as Microsoft, Amazon, Google and Meta are expanding their infrastructure footprints to support growing demand for AI-powered applications and services.

Importantly, this trend extends beyond advanced semiconductors. The expansion of AI infrastructure creates demand for a broad range of industrial products, including power distribution systems, cooling technologies, electrical equipment, grid components and energy solutions. Consequently, a much wider group of businesses stand to benefit from the global AI investment cycle.

Energy: A Critical Component of the AI Boom

One of the most important dimensions of AI infrastructure is energy.

AI workloads consume significantly more electricity than traditional computing applications, increasing demand for grid upgrades, power transmission, renewable energy assets and energy storage solutions. This is particularly relevant for China, which has established leadership positions in batteries, solar panels, electrical equipment and power electronics.

As governments and corporations invest to meet rising electricity demand generated by AI applications, these industries could experience sustained growth. The AI investment cycle therefore extends well beyond software and overlaps closely with several of China’s core industrial strengths.

A Broader AI Ecosystem

The chart also illustrates a broader shift in the technology landscape.

Historically, technological breakthroughs often generated the greatest benefits for innovation leaders. In the AI era, however, value creation is distributed across a much larger ecosystem involving both software and hardware providers. Every AI model ultimately relies on physical infrastructure for training, deployment and operation.

This creates what could be considered a second-order AI opportunity: investing not only in the companies developing artificial intelligence, but also in the businesses supplying the equipment required to power it.

Perhaps most importantly, this theme remains relatively resilient to uncertainty about which AI models ultimately emerge as market leaders. Whether future demand is captured by OpenAI, Anthropic, Google, xAI, DeepSeek or future entrants, the underlying requirement remains the same: more servers, more electricity, more cooling capacity, more networking equipment and more industrial infrastructure. Chinese manufacturers occupy strategic positions across many of these supply chains and may therefore benefit regardless of which AI developers ultimately prevail.

Looking Beyond Software

The AI revolution is not solely a software story.

Behind every breakthrough model lies a vast industrial ecosystem responsible for building and maintaining the physical infrastructure that makes artificial intelligence possible. As the next phase of AI development shifts from experimentation to large-scale deployment, manufacturers supplying the foundations of the digital economy may emerge among the most significant beneficiaries.

The global AI race is therefore not just about algorithms and semiconductors. It is increasingly about factories, supply chains, electrical infrastructure and industrial capacity.

Written by Gabriele Casati

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