According to analysts, China’s investment in artificial intelligence is expected to gain momentum next year as the persistent chip shortages start to subside. The firm indicated in a note on Friday that the disparity in AI-related expenditure between the United States and China has been pronounced. Economics observed that, although the “boom in AI capex has had a large impact on the trajectory of U.S. economic growth this year,” it is “hard to find evidence of any dramatic impact on the Chinese economy.”

Analysts indicated that the drag originates not from insufficient funding but rather from ongoing supply constraints. Chinese firms have been developing new models; however, there has been a reduction in investment towards expanding data center capacity due to a bottleneck in chip supply resulting from U.S. export controls. The firm asserts that domestic chipmakers are capable of producing processors that are “good enough for most inference workloads,” which currently represent the predominant application of global data-center compute.

However, they continue to rely on Western chipmaking tools, which are subject to restrictions, resulting in them “struggling to produce enough chips to meet demand,” according to the reports. The firm anticipates that this pressure will start to ease in 2026. Chinese chipmakers are reportedly “aiming to triple AI chip output next year,” and although this target may be uncertain, analysts anticipate “a sizeable increase in output” as yields improve.

Meanwhile, the easing of U.S. export restrictions allows Chinese companies to import Nvidia’s H200 chips, which are “far more powerful than what China had access to previously.” Alibaba and ByteDance have already indicated their interest. Capital Economics stated that AI investment “looks set to accelerate next year,” emerging as a bright spot in China’s economy; however, it cautioned that it will not completely counterbalance the broader investment slowdown in the country.