China's internet data centers (IDCs) will significantly benefit from large investments in artificial intelligence development, but the gains will mainly be channeled to the largest players rather than the smaller ones, S&P Global Ratings said in a Tuesday release.
Alibaba Group (HKG:9988) and Tencent Holdings (HKG:0700) will accelerate their combined annual spending on AI development to over 200 billion yuan for 2025 to 2026, from about 50 billion yuan in 2023, S&P said.
Major wholesale IDC operators like GDS Holdings (HKG:9698), VNET Group, and WinTriX DC Group are set to benefit, with S&P expecting strong revenues and improved EBITDA and cash flow visibility.
However, smaller and less competitive peers could face a possible asset bubble, according to the rating agency.
A key long-term risk is the supply of advanced chips, which could curb internet companies' ability to build AI infrastructure and their demand for data centers, S&P said.
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