AI enhances China's cloud computing

China's cloud computing industry is expected to usher in new development opportunities as the meteoric rise of Chinese artificial intelligence startup DeepSeek has challenged the belief that massive computing resources are essential for AI breakthroughs, experts said.

They added that with the maturity and application of AI technology, cloud computing services will be more user-friendly and efficient, usage scenarios will continue to expand, enterprises will play a bigger role in bolstering the integration of cloud computing and generative AI, and more technological advancements will be made in the intensifying global AI chatbot race.

Leading Chinese cloud computing companies, including Alibaba Cloud, Baidu AI Cloud, Tencent Cloud and Huawei Cloud have all integrated DeepSeek's AI models into their platforms after Deep-Seek recently caused a global sensation with its open-source large language model developed at a fraction of the cost and computing power typically spent by foreign counterparts.

Alibaba Cloud said it had made DeepSeek's AI model available on its platform, and users can achieve the whole process from training to deployment to inference with zero coding. The platform simplifies the model development process, bringing developers and enterprise users a faster, more efficient and more convenient AI development and application experience.

Charlie Dai, vice-president and principal analyst at research company Forrester, said Deep-Seek has had a huge impact on the cloud computing and AI industries in China as it accelerates the paradigm shift of AI model training, augments reasoning capabilities of AI for broader enterprise adoption and further boosts AI innovation.

He noted that major cloud service providers in China should step up efforts to capitalize on DeepSeek's popularity by integrating its capabilities into their services.

"On the one hand, they can focus on providing scalable cloud infrastructure to power AI workloads with the DeepSeek model at the core. On the other hand, they should develop innovative applications and solutions that leverage DeepSeek's AI power to enhance customer experiences and operational efficiency," Dai said. Additionally, ensuring data security and compliance with regulations is crucial to protecting sensitive information, he added.

Pan Helin, a member of the Ministry of Industry and Information Technology's Expert Committee for Information and Communication Economy, said the emergence of DeepSeek has significantly reduced the cost of computing power and improved the utilization rate of computing resources, while promoting the upgrade of cloud services and signaling a shift in the global cloud computing landscape.

Pan said cloud computing not only provides crucial support for boosting in-depth research, development and applications for AI in the future, but also effectively speeds up the iteration and deployment of AI models, and provides a solid computing power guarantee for the rapid development of AI technology.

Data from global market consultancy Canalys show that cloud infrastructure service spending in the Chinese mainland stood at $10.2 billion in the third quarter of 2024, representing 11 percent year-on-year increase and a return to double-digit growth.

AI is emerging as a significant driver of cloud adoption, with a growing number of enterprises embedding AI capabilities into cloud-based applications to enhance intelligence and streamline operational efficiency, according to Canalys.

Alibaba Cloud took the top spot in the Chinese mainland's cloud market, commanding a 36 percent share and achieving 7 percent year-on-year growth in the third quarter, largely driven by its public cloud business, followed by Huawei Cloud and Tencent Cloud.

Zou Debao, deputy general manager of the AI industry research institute at market research firm CCID Consulting, said the rapid ascent of DeepSeek has reshaped the development pattern of domestic cloud computing.

In the past, major cloud computing companies took a dominant position with strong computing power and technological advantages, but small and medium-sized cloud service providers could quickly improve their service capabilities and attract a new breed of customers through cooperation with DeepSeek, Zou added

Chinese cloud service providers have further elevated their capital expenditure, channeling resources into enhancing computing power, scalability and efficiency, said Zhang Yi, an analyst from Canalys.

"These investments aim to solidify their positions in key strategic domains, ensuring they remain at the forefront of technological innovation and market competitiveness in an increasingly AI-driven landscape," Zhang added.