US AI spending dwarfs China's as firms face chip restrictions

US tech giants are on track to invest over US$700 billion in AI capital expenditures this year, compared to about US$105 billion by Chinese firms, according to a Morgan Stanley report. Google and Microsoft each expect full-year capex of roughly US$190 billion, Meta Platforms raised its estimate to US$145 billion, and Amazon kept its outlook at US$200 billion. In contrast, Chinese cloud providers will likely spend US$105 billion in 2025. Last year, China's internet giants spent 400 billion yuan (US$59 billion) on AI capex, about a tenth of US peers, per UBS analyst Wei Xiong. Despite lower spending, Xiong noted Chinese firms have developed large AI models of comparable quality. Tilly Zhang of Gavekal argued that China's AI investment scale cannot be directly compared to US hyperscalers, as cost-effective Chinese models can still generate business returns. Due to US chip export restrictions, Chinese firms have focused on software and algorithm improvements rather than purchasing the most advanced hardware.