China’s AI Cloud Sector Surges 55% as Demand for LLMs Grows

TLDRs;

• China’s AI cloud sector surged 55% in 2024 to $2.7B, fueled by demand for large language models.
• Baidu and Alibaba lead with 25% market share each, while Tencent and Huawei trail in AI cloud.
• Computer vision grew 34% to $1.1B, and machine learning platforms soared 163.8% to $730M in 2024.
• Agentic AI marks a new era, forcing companies to adapt strategies within months instead of years.

China’s artificial intelligence (AI) public cloud market experienced explosive growth in 2024, expanding by 55% to reach 19.6 billion yuan (US$2.7 billion), according to new data from consultancy IDC.

This surge was largely fueled by the rising adoption of large language models (LLMs), the same technology behind generative AI tools like ChatGPT, which have rapidly moved from experimental applications to mainstream enterprise solutions.

Baidu and Alibaba Group Holding led the market, each capturing about 25% market share. Their dominance underscores a broader shift in how Chinese technology companies are positioning themselves in the global AI race, particularly as domestic demand for AI training and applications accelerates. Tencent Holdings and Huawei Technologies followed behind, though with comparatively smaller shares.

Large language models reshape enterprise adoption

The rapid rise of LLMs has become the defining trend in China’s AI sector. Since 2023, these models have overtaken traditional applications like optical character recognition and machine translation, bringing new momentum to the market.

LLMs are increasingly being deployed across industries, from customer service chatbots to financial analytics, reflecting their versatility in automating tasks that previously required human judgment. IDC noted that the emergence of agentic AI, or autonomous, task-oriented AI systems, is opening a new era where machines can not only generate responses but also execute multi-step processes independently.

This shift is compressing innovation cycles. Where companies once adapted to technological changes over several years, they are now being forced to adjust strategies within months to remain competitive.

Computer vision and machine learning segments soar

Beyond LLMs, other AI service categories also registered strong growth. Computer vision was the single largest segment, expanding 34% year-over-year to 8.1 billion yuan. Tencent Holdings and Baidu led this space, powering applications in facial recognition, surveillance, and smart city infrastructure.

Meanwhile, machine learning platforms saw extraordinary momentum, climbing 163.8% to 5.29 billion yuan. This acceleration highlights the increasing importance of platforms that allow developers and enterprises to build, train, and deploy custom AI models at scale.

The uneven growth rates across these segments suggest that while some AI applications are reaching maturity, others are only beginning to unlock their market potential.

Competitive dynamics shift in AI cloud market

One of the most striking patterns is the difference between China’s general cloud market and the AI-specific cloud sector. While Alibaba Cloud leads general cloud infrastructure with 33% share, followed by Huawei at 18% and Tencent at 10%, the AI cloud market is far less concentrated.

Here, Baidu and Alibaba are effectively locked in a duopoly, each with a quarter of the market, creating a more balanced competitive field. For Baidu, which trails in broader cloud services, this represents a significant opportunity to leverage its deep AI expertise to rival Alibaba in a high-growth segment.

Analysts believe this could reshape long-term industry dynamics, proving that specialization in emerging technologies like AI can disrupt established hierarchies and create new market leaders.

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