Analysis and Future Trends of the AI Server Industry
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With the explosion of large AI models since last year, the industry's use of cloud computing has once again become the core driver of growth. As a leader in cloud services, Alibaba Cloud has achieved remarkable development over the years, but with rapid industry changes, it is also actively adapting.
The AI server industry is an emerging sector that has risen alongside the rapid development of artificial intelligence technology. As the infrastructure supporting AI applications, the AI server industry has shown rapid growth in recent years.
Analysis and Future Trends of the AI Server Industry
The explosive growth of global data has driven a continuous increase in data storage demand. Compared to traditional mechanical hard drives, solid-state drives (SSDs) are more efficient and have become the mainstream storage devices for AI servers. In recent years, global SSD shipments have shown an upward trend, reaching 420 million units in 2022.
With the widespread application and adoption of AI technology, the AI server market continues to expand. Particularly in fields such as cloud computing, big data, and smart manufacturing, the demand for AI servers is growing steadily. Market research institutions predict that the AI server market will maintain rapid growth in the coming years.
The development of the AI server industry relies on technological support and innovation. With advancements in chip technology, computing architectures, and cooling solutions, the performance and efficiency of AI servers have significantly improved. At the same time, as AI algorithms and models continue to be optimized, AI servers can better support various complex AI applications. The applications of AI servers continue to expand across various fields. In smart manufacturing, AI servers can be used for automated production and intelligent warehousing. In smart cities, they support intelligent transportation and security systems. In financial services, AI servers enable risk assessment and intelligent investment advisory. With the continuous development and popularization of artificial intelligence technology, the application areas of AI servers will further expand.
The AI server industry, as the infrastructure supporting AI applications, has broad development prospects.
In China, the upstream of the AI server industry chain consists of core components and software suppliers; the midstream includes AI server manufacturers; and the downstream comprises various application markets, such as internet companies, cloud computing enterprises, data center service providers, government departments, financial institutions, healthcare, and telecom operators. According to statistics, in 2022, internet companies accounted for 47.5% of China's AI server market by sales, followed by telecom operators at 19.6%, with communications, government, manufacturing, education, and finance sectors accounting for 8.6%, 6.3%, 5.1%, 5%, and 3.8%, respectively.
Alibaba Cloud's adjusted EBITA profit surged 86% to 2.364 billion yuan.
The latest financial report shows that Alibaba Cloud's adjusted EBITA profit surged 86% to 2.364 billion yuan, setting a new fiscal year record. Prior to this, Baidu Intelligent Cloud also demonstrated its ability to achieve consecutive profits in its Q2 financial report. Similarly, cloud giants like Tencent Cloud and Huawei Cloud have also begun shifting their focus. On one hand, the negative effects of intense competition among top cloud service providers are becoming evident, prompting a new consensus on balancing efficiency and market share. For instance, Alibaba Cloud, facing slowing revenue growth, has significantly adjusted internal underperforming projects to correct course and achieve a balance between scale and efficiency. Similarly, Huawei Cloud shows greater interest in government and enterprise projects while maintaining strong involvement in public cloud services. Baidu Cloud, meanwhile, focuses its core efforts on intelligent cloud solutions, seeking opportunities in this direction.
On the other hand, the explosion of large AI models has injected new vitality into the industry, creating fresh opportunities for cloud service providers.
Since last year, with the rise of large AI models, major cloud providers like Alibaba Cloud, Baidu Cloud, Huawei Cloud, and Tencent Cloud have quickly adapted. For example, Alibaba Cloud not only released large models and their applications but also launched an open-source community for large models. Baidu Cloud has expanded its layout from cloud services to underlying frameworks and applications, promoting large model training. Similarly, Huawei Cloud and Tencent Cloud have introduced their own large models.
AI Continues to Drive Momentum Amid Policy Focus
Recent favorable policies and eased market liquidity pressures, combined with continuous advancements in AI and robotics, have reversed market sentiment and triggered a strong rebound. This week, China's A-shares showed an upward trend, with the Shanghai Composite Index rising by 0.7%, and average daily trading volume surging to 1.1 trillion yuan.
Northbound capital recorded a net inflow of 23.5 billion yuan for the week, marking the fifth consecutive week of net inflows. Sector-wise, TMT-related industries such as computers, electronics, and communications led the gains, while banking, transportation, and utilities saw some pullbacks. On Monday and Tuesday of this week, the National People's Congress will convene in Beijing. It is expected that the policy stance will continue to emphasize "seeking progress while maintaining stability, promoting stability through progress, and establishing before dismantling." Key areas to watch include GDP growth targets, inflation, deficit ratio goals, and arrangements for monetary and fiscal policies.
Over the weekend, the AI computing industry chain remained highly topical. Overseas, DELL's stock surged by 32% after releasing its earnings report on Friday, while Supermicro Computer's stock rose over 14% in after-hours trading. DELL raised its performance expectations and significantly revised its 2027 AI server market projection to $152 billion (up from the previous estimate of $124 billion).
In its latest earnings call, DELL emphasized the sustained strong demand for its AI server product portfolio. Orders for AI servers increased by 40% quarter-over-quarter, and backlog orders doubled. Customers are showing significant interest in next-generation AI servers.
With the advancement of artificial intelligence, accelerating the construction of computing power centers has become urgent. Domestically, the State-owned Assets Supervision and Administration Commission (SASAC) has required central enterprises to "accelerate the construction of a batch of intelligent computing power centers." Central and state-owned enterprises are expected to expedite AI development, with computing power being a critical foundation. Against the backdrop of U.S. restrictions on high-end AI chips, domestic computing power is rapidly catching up and is poised for explosive growth.
Future Trends in the AI Server Industry
The AI server industry is likely to continue witnessing technological upgrades and innovations. These may include more efficient processors, larger memory capacities, and faster storage solutions. Additionally, with the development of new technologies such as edge computing and quantum computing, the AI server sector may experience corresponding technological breakthroughs. AI servers may develop towards diversification and customization. AI server suppliers may need to offer a variety of different products and solutions to meet the needs of different customers.
With increasing global attention on environmental protection and sustainable development, the AI server industry may place greater emphasis on the energy efficiency and environmental friendliness of its products. This could drive the industry towards more energy-efficient and eco-friendly development.
The AI server market is continuously expanding. Due to the substantial data and computing power required for AI calculations, the AI server market has experienced rapid growth. It is predicted that the global AI server market will maintain its growth trajectory in the coming years. Particularly in fields such as cloud computing, the Internet of Things (IoT), and autonomous driving, the demand for AI servers is expected to surge. The AI server industry has a promising future, with its market size set to continue expanding.
With the expansion of the cloud services market, the influence of Cloud Service Providers (CSPs) in the AI server market is likely to increase. In the future, as technology continues to innovate and application scenarios broaden, AI servers will play an even more critical role.