Author: admin

Stay informed with free updates

Simply sign up to the Technology sector myFT Digest — delivered directly to your inbox.

China has increased subsidies that cut energy bills by up to half for some of the country’s largest data centres, as Beijing steps up efforts to boost its domestic chips industry and compete with the US.

Local governments have beefed up incentives to help Chinese tech giants such as ByteDance, Alibaba and Tencent, which have been hit with higher electricity costs following Beijing’s ban on purchasing Nvidia’s artificial intelligence chips, according to people familiar with the matter.

They added that the new subsidies come after several tech groups complained to regulators about the increased costs of using domestic semiconductors from companies such as Huawei and Cambricon, most of which are less energy-efficient than Nvidia’s.

Local governments in data centre-heavy provinces such as Gansu, Guizhou and Inner Mongolia have responded by offering subsidies that slash big data centres’ electricity bills by as much as 50 per cent, provided that they are powered by domestic chips.

Data centres using chips from foreign vendors such as Nvidia are not qualified for such entitlements, the people said.

The move is a further sign of how China is incentivising its tech companies to break their reliance on Nvidia and boost the country’s homegrown semiconductor industry so it can compete in an AI race against the US.

Electricity required to generate the same amount of tokens — units of compute power — from the current generation of Chinese chips is about 30 to 50 per cent higher than Nvidia’s H20, according to experts.

Huawei, China’s leading chipmaker, has sought to overcome the weaker single-chip computing performance of its flagship Ascend 910C chip by combining them into larger clusters, which has added to the operating electricity costs.

While tech companies typically lease compute power from third-party data centre operators, they still need to build a significant amount themselves to meet surging demand from AI-driven businesses.

Despite the higher energy costs related to using domestic chips, China’s more centralised grid network still provides cheaper and greener electricity than the US with no near-term shortage.

China’s energy-rich remote provinces such as Gansu, Guizhou and Inner Mongolia have become hotspots for data centre clusters.

To attract the biggest projects, these local governments have already been competing to offer some energy subsidies as well as cash incentives.

Some of these are enough to cover a data centre’s operating cost for about a year, said a person with knowledge of the matter.

Unit costs of industrial electricity in these provinces are about 30 per cent cheaper than those from the more developed coastal areas of eastern China. With the new subsidies, they will be cut further to about 0.4 yuan, or 5.6 cents, per kWh.

This compares with the average industrial electricity cost of about 9.1 cents per kWh in the US, according to August data published by the US Energy Information Administration.

Electricity prices vary significantly in different US states due to fragmented grid networks, while US tech groups such as Meta and Elon Musk’s xAI are also building their own generators near their data centre clusters in order to lower energy costs.

ByteDance, Alibaba and Tencent did not respond to requests for comment.

The local governments of Guizhou, Gansu, Inner Mongolia and China’s National Development and Reform Commission did not respond to requests for comment.

Additional contributions from Cheng Leng in Beijing

Spectro Cloud, a Goldman Sachs–backed (NASDAQ:GS) startup valued at about $750 million, announced on Tuesday that it entered a strategic partnership with Nvidia (NASDAQ:NVDA) to address one of the biggest challenges in artificial intelligence: approximately 70% of computing power that often sits unused.

Spectro Cloud unveiled its PaletteAI platform with Nvidia integration, which promises to increase graphics processing unit efficiency from 30% to 60%, potentially saving enterprises millions on infrastructure costs, Business Insider reported.

“AI infrastructure is super expensive,” Spectro Cloud co-founder and CEO Tenry Fu told BI, adding that most organizations achieve only 30% GPU utilization. “That’s not really the best way to put such an expensive hardware into use,” he said.

Don’t Miss:

Many organizations spend large sums on Nvidia hardware and software but still face management challenges that leave much of their computing power unused, according to BI.

PaletteAI serves as what Spectro Cloud Chief Technology Officer Saad Malik calls the “glue layer,” BI reported. The platform connects different hardware and software components, helping them work together without friction.

The system integrates with Nvidia AI Enterprise software and tools such as Nvidia NeMo and Nvidia NIM, according to Spectro Cloud. While designed for Nvidia technologies, PaletteAI remains open and flexible, allowing companies to connect products from other technology providers as well.

“Growing adoption of AI across every industry calls for scalable, adaptable infrastructure that bridges the data center and the edge,” Nvidia Senior Director of Enterprise Anne Hecht said in Spectro Cloud’s statement. “Spectro Cloud’s integration of full-stack Nvidia AI is empowering enterprises to build and operate AI factories with performance, efficiency, and trust.”

Trending: Accredited Investors Can Now Tap Into the $36 Trillion Home Equity Market — Without Buying a Single Property

Spectro Cloud Chief Revenue and Marketing Officer Dave Cope told BI that the pace of technological change has reached an entirely new level. “We live in a really interesting time now where, for the first time and perhaps ever, we have — because of AI — everything changing rapidly and at the same time,” he said, adding that AI is transforming multiple areas of business at once, creating constant pressure to adapt.

Cope said this fast evolution adds what he called a “tremendous amount of complexity” that can slow innovation and delay adoption, BI reported.

PaletteAI addresses that challenge with what Spectro Cloud describes as “one-click deployment” of AI systems. The platform separates roles between administrative teams, who manage governance and security, and AI specialists, who need freedom to experiment and build new solutions.

See Also: If there was a new fund backed by Jeff Bezos offering a 7-9% target yield with monthly dividends would you invest in it?

PaletteAI offers advanced security functions using Nvidia BlueField data processing units, which enable zero-trust access and support federal information processing standards compliance. According to Spectro Cloud, the platform automates setup, provisioning, and management across cloud, data center, and edge environments.

Enterprises can create full AI environments using Nvidia infrastructure in a matter of hours instead of weeks, Spectro Cloud said. The system supports the latest Nvidia technologies, including Blackwell GPUs, Grace central processing units, and the BlueField-3 and BlueField-4 data processing units.

Administrative teams manage oversight through policy controls while AI practitioners work from approved templates, creating an environment that stays efficient, secure, and consistent across every deployment, Spectro Cloud said.

Read Next: Wall Street’s $12B Real Estate Manager Is Opening Its Doors to Individual Investors — Without the Crowdfunding Middlemen

Image: Shutterstock

UNLOCKED: 5 NEW TRADES EVERY WEEK. Click now to get top trade ideas daily, plus unlimited access to cutting-edge tools and strategies to gain an edge in the markets.

Get the latest stock analysis from Benzinga:

This article Nvidia Partners With $750M Startup Spectro Cloud To Fix AI’s Biggest Problem: Companies Waste 70% Of Their GPU Computing Power originally appeared on Benzinga.com

© 2025 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.