China's Alibaba Tencent and Baidu double down on AI spending
China's tech giants, Alibaba, Tencent, and Baidu, just doubled down on AI, with capital spending jumping 105% in the second quarter of 2026 to reach $19 billion.
This surge is fueled by huge demand for AI and easier access to NVIDIA's H200 chips.
The rapid growth has US cloud companies on edge about staying competitive.
Chinese firms' $9B AI chip estimate
Chinese firms could have spent up to $9 billion just on AI chips (think enough servers to fill a small city), with most of that coming from Alibaba, Tencent, and Baidu. A chunk also went to local chipmakers like Huawei.
Interestingly, these companies spent more than they earned from their cloud businesses last quarter (176% of revenue), partly due to big one-time chip buys and Tencent's heavy AI spending for internal use.
US cloud faces bigger financial risks
US cloud giants usually put more of their revenue into capital expenses than Chinese firms (119% vs. 111%), but analysts say the US faces bigger risks now.
With costs rising faster than revenue and heavy reliance on closed-source AI models, there's growing pressure for US companies to turn all this investment into real returns.