Chinas Ambitious Plans for AI: Building Massive Data Centers in the Desert

Chinese companies are poised to procure over 115,000 advanced Nvidia chips to support new facilities and further train AI models, according to reports from Bloomberg, which cites investor documents and tax filings.

In a remote desert area of the northwestern Xinjiang region, China is developing numerous data centers to house these processors. However, it remains unclear how these companies plan to acquire the chips, especially in light of the export ban imposed by U.S. authorities.

Bloomberg spoke with more than ten individuals involved in U.S. investigations on this matter, as well as several sources familiar with China’s shadow market.

Reports indicate that around 25,000 banned Nvidia chips currently exist in China. Nonetheless, this figure does not raise significant alarm, as it could only support operations for a maximum of one medium-sized data center.

Nvidia has noted that «the idea of constructing a data center using smuggled older generation chips lacks both business rationale and engineering sense,» particularly given the wide availability of servers and processors manufactured by Huawei within China.

Bloomberg could not find evidence to confirm that the country has already amassed 115,000 illicit chips or that it could achieve this. Nonetheless, construction is ongoing.

The U.S. prohibited the import of advanced Nvidia chips in October 2022, and since then, Washington has repeatedly tightened restrictions, banning the supply of various types of semiconductors and manufacturing equipment to China.

It’s worth noting that China views data as the fourth factor of production, alongside labor, capital, and land.