China's AI craze has led to empty data centers and falling GPU rentals

TL;DR: In the wake of ChatGPT's explosive debut in late 2022, China's AI industry experienced a surge of excitement and investment. However, this initial fervor has given way to a sobering reality as the country grapples with an oversupply of underutilized data centers and shifting market dynamics.

Xiao Li, a former real estate contractor who pivoted to AI infrastructure in 2023, has witnessed this transformation firsthand through the fluctuating demand for Nvidia GPUs. A year ago, traders in his network boasted about acquiring high-performance Nvidia GPUs despite U.S. export restrictions. Many of these chips were illegally funneled into Shenzhen through international channels. At the market's peak, an Nvidia H100 – crucial for training AI models – could fetch as much as 200,000 yuan ($28,000) on the black market.

Today, Li noticed that traders have become more discreet and GPU prices have stabilized. Additionally, two data ...