In a global first, China has launched a cutting-edge commercial underwater data centre in Hainan. The facility has the potential to upgrade digital service offerings, increase Beijing’s share of global internet traffic and serve as a magnet for foreign direct investment from global technology giants.

To make progress, China must find a competitive edge, given the fast-expanding infrastructure in the United Arab Emirates and the United States, where rivals in the artificial intelligence (AI) race are directing billions to build five new data centres across the country.

This is where China’s push to lead the US$242 billion data centre industry meets a key challenge. It starts with the striking rate of data centre expansion in the Gulf. The Trump administration has sealed a range of multibillion-dollar deals to advance chip supplies to the UAE, which is on course to build the Stargate UAE AI data centre. This facility will see major commercial institutions in the UAE tie their digital operations to a single, cutting-edge data ecosystem built on US technology.

For instance, the UAE and US do not face China’s constraints of limited capital from corporate investors. The US is also better positioned to increase its lead in data centre build-up. One critical advantage is the growing convergence between the investment and supply chain demands of its flagship chip producer Nvidia and the Trump administration.

While China demonstrates how land-based data centres can be made cost-effective underground, the US government is taking financial stakes in semiconductor companies and building confidence among leading chipmakers to jointly pool resources and accelerate data centre production. As a result, the pace and scale of Washington’s interventions challenge China’s bid to lead the data centre industry in the near term.