Cloud companies operating in China saw a performance surge in the first half of 2025, driven by the DeepSeek-fueled artificial intelligence (AI) boom, writes ChinaAI in a translated article detailing the “Mid-Year Review of Major Cloud Providers” in China.
The article starts with an anecdote: earlier this year, Zhang Xun, a sales rep for Volcano Engine (Bytedance’s cloud offering), worried about meeting his sales quotas. DeepSeek’s release, however, “dropped a bombshell in the market,” driving AI demand across industries and sending cloud usage soaring. As he put it: “GPUs flew off the shelves in the first half of the year.”
A surprising source of demand came from government agencies and state-owned enterprises, which at times showed more enthusiasm for deploying DeepSeek than private firms.
But the AI momentum may not have carried into the second half of the year. As the third quarter began, sales teams saw business tighten. Finding new customers proved difficult, with one industry professional remarking that beyond a handful of large firms, few notable AI applications existed in China.
Meanwhile, the cloud price war showed no signs of easing. Large clients tend to bypass vendors by building their own infrastructure, and smaller ones view cloud companies’ offerings as interchangeable, often leaving sales teams with no choice but to keep competing on price.
Both domestic and foreign cloud providers are recalibrating their strategies in China, with AWS fighting to stem client losses to Chinese competitors, and Microsoft reducing its exposure to Chinese government and enterprise customers.
The “jaw-dropping stat from the article”, according to Jeffrey Ding, assistant professor of Political Science at George Washington University and founder of ChinAI: “In fact, over the past two years, the Chinese market has consistently been the primary consumer of Microsoft Cloud’s AI services. In the second half of last year, roughly one-quarter of Microsoft Cloud’s global OpenAI-related business revenue came from the Chinese market.”