In recent months, the demand for AI-driven inference applications has surged, largely attributed to the release of DeepSeek, a groundbreaking AI model that presents a wealth of opportunities for various actors in the tech industrySignificantly, Huawei's ecosystem appears to be exceptionally well-adapted to leverage the potential of DeepSeek, which is expected to bolster the profitability of telecommunications operators by enabling them to better utilize their expansive computational resourcesAs the scalability advantage offered by intelligent computing becomes clear, both the usage rates and the pricing of computational power, particularly in China, seem poised for a notable rebound.

The landscape of the data center industry, known as IDC (Internet Data Center), reveals an emerging trend where operators are increasingly focused on enhancing their service offerings while optimizing the efficiency of their resourcesThis strategic path aims to tap into the available bandwidth to improve their profitability furtherIn a market that has shown evidence of growth, the leading three domestic operators currently hold over half of the market share in the IDC sectorThis dominance reflects their substantial resource allocation, wherein China Mobile, China Telecom, and China Unicom have constructed extensive IDC infrastructures across the nation.

For instance, a report by IDC Consulting indicates that the three major domestic telecom operators possess robust data center resources, encompassing nearly 600,000 rack units collectively by mid-2023. Initiatives implemented by these companies range from harnessing advanced computational networks, as proposed by China Mobile's "4+N+31+X" strategy, to building resource pools that encompass a comprehensive framework designed for optimized computing capabilities, laid out by China Telecom and China Unicom.

The impetus for growth in the IDC sector is further enhanced by the burgeoning demand for AI applicationsAs a result of DeepSeek’s capabilities in driving inference requests, the need for high-performance computational infrastructure is anticipated to witness a substantial increase

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This burgeoning interest in AI technologies could not only rejuvenate existing services but also lead to a rich diversity of new applications across different industries, thereby strengthening the economic landscape of AI-driven technologies.

From a financial perspective, the revenue generated by IDC has shown commendable performance compared to other players within the industryFor example, in 2022, China Mobile and China Telecom reported IDC-related revenue of approximately $36 billion and $46 billion, respectivelyWhen juxtaposed against third-party IDC companies like GDS Holdings and Century Internet, which posted significantly lower revenues, the advantages of having a well-founded telecommunications infrastructure become evident.

Meanwhile, the integrated strategies that operators adopt are bolstered by the deployment of DeepSeek, which can potentially drive considerable enhancements in the rental rates for computational capacityThe reverberation of AI’s capacity in spurring demand shows that operators might encounter higher profitability margins as they optimize their offeringsResearch data indicates a current turning point where the rental prices for top-tier computational powers in data centers could significantly escalate, primarily driven by a marked increase in demand, especially in major urban centers.

With reference to the market dynamics, the adoption of intelligent computing resources by operators stands out, particularly as seen with their embrace of DeepSeekWith the proliferation of such high-performance models, a growing number of domestic cloud platforms and GPU chip manufacturers have started integrating these capabilities into their service offeringsThis close integration further affirms the potential for a thoroughly interconnected ecosystem that accelerates the deployment of AI applications.

Moreover, as the telecom giants continue to expand their technical capabilities, they maintain a clear trajectory toward improving their revenue from associated cloud services, marking them as significant players in the domestic cloud services market

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The data substantiates this growth; in the first half of 2024, the recognized increase in revenue for the cloud services sector, influenced by broader AI adoption, reinforces this trend, showcasing robust growth rates across all the major operators.

Telecom operators are strategically positioned as the mainstay of China’s domestic computing landscape, having invested significantly in domestic chip technology to bolster their capabilitiesA focus on utilizing indigenous products, particularly chips that align with the Huawei Ascend series, highlights the emphasis on developing self-sufficiency in technologyThis practice aligns with national objectives to support domestic innovation while also ensuring a steady supply chain for advanced computational needs.

Looking forward, there is an evident optimism surrounding the prospects of Intelligent Computing with models such as DeepSeek being fully integrated with telecom infrastructuresThe anticipated rise in demand for AI applications indicates that rental rates for AI-powered computing resources could escalate sharplyWhere current server pricing for high-end configurations stands significantly influenced by the capacities offered by NVIDIA’s H100 series, expectations indicate recovery in pricing models across various service tiers, potentially stabilizing around reasonable pricing bands.

This transformative phase also ushers in expectations of markedly improved profit margins for operators engaged in intelligent computing servicesHistorical data suggests that as operational efficiencies improve through careful management of energy usage and infrastructure effectiveness, operators could see their profits significantly outpace revenue growth, a trend observed in other sectors harnessing AI technologies.

With the fundamentals of network integration and data safety underpinned by national policies, telecom operators are enhancing their positions in the volatile market of cloud computing

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