China's AI Path: From Rmb8.5tr Capex to 3x Compute

We forecast Rmb8.5tr total capex, 2026-30E, in China, equating to on average ~17% of the US peer total, supporting IT capacity reaching 81GW by 2030E from 26GW in 2025. Hyperscalers are the main contributor, adding 47GW of compute globally in five years, with net adds in 2026-28E equating to ~22% of the US peer level. Telcos and neoclouds provide the second and third pillars of demand. We see domestic capex well funded by operating cash flow, cash balances, leases and prepayments, but potential offshore financing of Rmb2.0tr (US$294bn) may be needed for offshore capex over 2026-30E. Our ROIC framework shows ~13% ROIC for self-owned GPU IaaS, up to 29% for self-built compute plus third-party API (3P MaaS ~30%), but lower at ~9% ROIC (3.6 years payback) with the upcoming generation of domestic chips, which could improve as localization advances. We stay OW on AI infrastructure (Alibaba, Kingsoft Cloud, VNET), AI labs (MiniMax, Zhipu) and GPU localization (Cambricon, Illuvatar, Hygon).