The Unlikely Place at the Center of China’s AI Boom
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- Ulanqab has seen nearly 100 data centers opened or under construction since 2016, with Chinese companies pledging 12.5 GW of total capacity and over 70% of those commitments announced in just the last year, according to a Goldman Sachs research note.
- The 12.5 GW pledged in Ulanqab exceeds OpenAI's $500 billion Stargate Project, which is set to reach only 10 GW of total capacity when complete.
- DeepSeek, ByteDance, Alibaba, and Xiaohongshu are building their own AI infrastructure in the city — the first time Chinese AI companies have made major investments in physical compute rather than renting from cloud providers.
- The boom is fueled by cheap electricity, high elevation and cold winters that reduce cooling costs, and two dedicated fiber-optic cables built in 2017 and 2019 that reduced latency to under 5 milliseconds.
- Ulanqab faces a mounting water crisis, receiving only about 14 inches of rain per year (roughly Denver-level aridity); the local water company last month began shutting off waterworks for seven hours each night to manage peak demand.
- About 37% of Ulanqab's electricity still comes from coal, even as wind-turbine maker Envision announced a 2 GW AI data center connected directly to its own clean power supply this month.
Why it matters: Chinese AI labs are closing the physical-infrastructure gap with US peers, with Ulanqab's 12.5 GW of pledged capacity now exceeding OpenAI's 10 GW Stargate — but the region's 37% coal dependency and water scarcity (14 inches of annual rainfall, nightly water shutoffs already underway) pose hard ceilings on how far the boom can scale.
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