Chinese AI firms get more computing power per dollar than US competitors, Moody's finds

Punching above their weight: how China's AI giants stretch each dollar in compute race

A new report from Moody's Ratings suggests that the massive spending gap between American and Chinese artificial intelligence leaders may not translate into a corresponding advantage for US tech titans, as lower domestic costs allow Chinese firms to secure far more computing power per dollar. While US hyperscalers outspent their Chinese counterparts by a staggering margin, the physical gap in actual computing capacity was nowhere near as wide as those mega-budgets suggested. Lower buildout costs, targeted policy incentives and access to cheaper green energy meant Chinese tech firms were punching above their financial weight, narrowing the compute divide with American peers at a fraction of the price, Moody's noted.

The capital expenditure by China's major tech companies was set to more than double to around US$140 billion this year, up from US$65 billion in 2025, and reach US$165 billion by 2027, according to Moody's. This trajectory indicates a significant acceleration in investment compared to the previous fiscal period cited in the report.

Despite these figures, the US retained a clear overall lead in cutting-edge semiconductor chips, indicating that hardware leadership remains with American firms at this stage of development. However, the findings suggest headline capex numbers tell only part of the story regarding competitive parity. The disparity between reported spending and actual capacity underscores how structural factors are altering the traditional economic calculus of the global AI race.

Moody's Ratings highlighted that while US companies continue to dominate in advanced chip manufacturing, Chinese firms have leveraged their operational environment to achieve greater efficiency per dollar spent. This dynamic raises a critical question: does the spending gap still matter when one side can deploy infrastructure more effectively than the other? The report implies that cost structures and policy support are reshaping how compute power is utilized across borders.

The analysis points toward a future where financial outlays alone may not determine technological superiority, as efficiency becomes an equally decisive metric in high-stakes competition. Chinese tech firms' ability to utilize cheaper energy sources has been identified as a key enabler of this cost advantage, allowing them to expand their physical footprint without matching US expenditure levels.

As the sector moves forward, observers will likely look beyond raw capital figures to understand who truly holds leverage in terms of operational scale and deployment speed. The narrowing divide mentioned by Moody's signals that China is successfully mitigating some of the historical financial disadvantages faced against American peers through strategic cost management rather than increased spending alone.

Source: South China Morning Post