China AI capex surged 105% to $19 billion in Q2
Chinese tech giants spent roughly $19 billion on AI infrastructure this quarter, driven by rising inference demand and better chip access. Jefferies argues US cloud providers face greater sustainability risks due to higher investment relative to revenue.
Chinese technology companies increased capital expenditure by 105% year-over-year during the second quarter of 2026. Combined spending by Alibaba, Tencent, and Baidu reached 126 billion yuan, approximately $19 billion. This growth was fueled by surging demand for artificial-intelligence inference and improved access to advanced chips. Total capital expenditure rose an additional 95% sequentially.
Jefferies notes that China's spending intensity remains lower compared to company revenues. Their analysis highlights that cloud companies' capex reached 176% of cloud revenue in the latest quarter, up from 111% over the previous four quarters. In contrast, US peers recorded capital expenditure equal to 130% of their cloud revenue.
Jefferies considers investment relative to cloud revenue a more critical indicator for AI infrastructure sustainability. The firm suggests China's quarterly data was skewed by irregular chip purchases and Tencent's shift toward internal AI use rather than public-cloud sales. Consequently, Tencent's infrastructure investments do not always convert directly into cloud revenue.
