Combined capital expenditure by Alibaba, Tencent and Baidu surged 105 percent year over year and 95 percent quarter over quarter to 126 billion yuan, roughly $19 billion, in the latest period. Jefferies says the real risk sits across the Pacific.
The intensity measure flips the story
Jefferies prefers capital expenditure relative to cloud revenue because so much of the new outlay targets AI infrastructure. On that yardstick Chinese cloud operators spent 176 percent of their cloud revenue in the quarter, while the three big US hyperscalers came in at 130 percent. Any ratio above 100 percent signals that infrastructure investment is outpacing the cloud revenue it is meant to support. The brokerage is more worried about the American side because US models are largely closed-source and accessed through paid cloud services, giving those providers a clearer monetization path. Even with that advantage, US cloud capex still ran 30 percent above cloud revenue in the June quarter and the gap has kept widening.
What drove the Chinese jump
Alibaba’s outlay climbed 75 percent from a year earlier, Tencent’s 176 percent and Baidu’s 55 percent. Sequentially Alibaba jumped 152 percent, Tencent 65 percent and Baidu was flat. Jefferies points to strong demand for AI inference, the business of running trained models, and a window to buy Nvidia H200 chips. The firm estimates China took delivery of about 200,000 H200s, equivalent to 25,000 HGX H200 servers, at a cost of $8 billion to $9 billion. Assuming ByteDance absorbed 30 percent, the three named companies likely spent $5 billion to $6 billion on those chips, accounting for 55 to 65 percent of their sequential increase. The remaining $3 billion to $4 billion probably went to domestic silicon, with Huawei the biggest likely beneficiary.
The longer view still favors the US
Measured against total revenue, Chinese cloud capex intensity sits at 25 percent versus 33 percent for the US trio. Over the past four quarters the Chinese group averaged roughly 16 percent while Amazon, Microsoft and Google averaged about 27 percent. Chinese spending grew 30 percent over that span; the US counterparts grew 76 percent. China’s previous peak intensity was 14.5 percent in the final quarter of 2024, so the latest jump adds about 10 percentage points. The US ratio has more than doubled from the end of 2024 through the June 2026 quarter, a rise of roughly 17 percentage points.
What to watch next
Jefferies expects Chinese outlays to keep rising as inference demand grows and local firms buy more homegrown chips, but it does not forecast triple-digit quarterly growth persisting or the intensity gap closing anytime soon. A single quarter of elevated spending does not rewrite the structural picture.