Ulanqab, a sparsely populated city in China's Inner Mongolia region, has rapidly become a major hub for AI data centre construction, with nearly 100 facilities opened or under way since 2016. The boom matters because it marks a shift in how Chinese AI firms operate: companies such as DeepSeek, ByteDance, Alibaba and Xiaohongshu are now investing directly in their own physical infrastructure rather than renting computing power, narrowing a long-standing gap with US rivals that have spent far more heavily on data centres.

Chinese firms have pledged data centre capacity totalling roughly 12.5 gigawatts in Ulanqab, more than OpenAI's $500 billion Stargate project, according to Goldman Sachs research, with over 70% of that pledged capacity announced in the past year alone. The city's appeal lies in its cold climate, which cuts cooling costs, its proximity to Beijing for low-latency data transfer, and cheap electricity from abundant coal and growing wind and solar power. However, the region's dry climate, comparable to Denver's, is straining water supplies already stretched by residential demand, with the local water company recently forced to shut off supply for seven hours nightly, raising concerns about the environmental sustainability of further expansion.