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Artificial intelligence
TechTech Trends

China’s cloud computing market loses steam in first quarter, but generative AI demand offers a silver lining

  • Spending on cloud infrastructure services in China rose 6 per cent in the three months to March, the third consecutive quarter of single-digit growth
  • The end of remote work arrangements reduced demand for cloud services, but demand is rising for a variety of new ChatGPT-like AI services

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Spending on cloud infrastructure such as servers in China grew 6 per cent in the first quarter, the third consecutive quarter of single-digit growth for an industry that had once been a star performer. Photo: Shutterstock
Iris Dengin Shenzhen
China’s cloud computing market growth slowed to a relatively sluggish 6 per cent in the first quarter this year, as demand for online work platforms waned in the post-pandemic era, while the rise of ChatGPT-like artificial intelligence (AI) tools signalled a way forward.
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Spending on cloud infrastructure services saw its third consecutive quarter of single-digit growth, reaching US$7.7 billion in the first three months of the year, according to a report from research firm Canalys on Thursday. China accounted for 12 per cent of the global market, down from 13 per cent a year earlier.

The lacklustre results for an industry that has been a star performer in recent years comes after the country lifted its strict Covid-19 control measures that many hoped would help lift the economy. But it also meant lower demand for online meetings and remote work tools, according to Canalys. Businesses are more cautious with tech spending and investment, as well, amid a weak macro-environment.

Demand for generative AI and the models that power it, on the other hand, is expanding following the explosion of interest in OpenAI’s ChatGPT. The technology is expected to drive new growth opportunities in the cloud computing market, Canalys said in the report.

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Major cloud service providers in China have been ramping up their offerings of conversational AI products for users and a variety of AI models for enterprise clients. In April, Chinese e-commerce giant Alibaba Group Holding, owner of the Post, launched its own large language model (LLM) Tongyi Qianwen for use in multiple industries. That same month, Huawei Technologies launched Pangu AI for enterprise use.
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