Beijing's $295 billion AI buildout would require 80 percent domestic chips, locking out US suppliers

Beijing is preparing a massive investment program to expand AI infrastructure nationwide. Meanwhile, Taiwan is considering making the export of AI chips to China a criminal offense for the first time.

China plans to invest roughly 2 trillion yuan ($295 billion) over the next five years to build a nationwide data center network, according to Bloomberg. The National Development and Reform Commission is drafting a blueprint that lays out a web of interconnected computing hubs.

State-owned companies like China Mobile and China Telecom would operate most of the data centers. At least 80 percent of the technology used - including AI chips - would come from domestic suppliers like Huawei. That would effectively shut out Nvidia and AMD.

Funding would come mainly from ultra-long-term government bonds and state investment funds, supplemented by bank loans and private capital. The plan is part of the "Six Networks" program announced earlier this year, which covers critical infrastructure from water and power to computing capacity. Under the plan, China's AI industry would grow to more than 10 trillion yuan in total volume.

China's most aggressive AI push yet

The investment target is Beijing's most ambitious effort yet to lay the groundwork for Chinese AI development, Bloomberg reports. By 2028, scattered data centers would be linked into a single coherent network. Including power infrastructure, the total investment could reach at least 5 trillion yuan.

FUS tech giants like Meta and Microsoft are planning about $725 billion in AI spending for 2026 alone. Chinese data centers are cheaper to build, though, thanks to lower labor and construction costs. And the 2 trillion yuan figure doesn't include private spending from companies like Alibaba and Tencent.

Nine Chinese AI chips - from Huawei, Alibaba, Shanghai Biren Technology, and others - recently passed a government security review, Bloomberg reports. That clears the way for their use in security-sensitive sectors. According to Bloomberg Intelligence, the main beneficiary of the plan is the broader economy, not individual private companies. Huawei stands to gain the most.