Explosive global investment in artificial intelligence is driving a surge in demand for power-hungry data centers, fueling a boom in exports by Chinese suppliers of transformers, energy storage systems and cooling equipment, even as geopolitical tensions and tariff uncertainty persist.
AI data centers consume far more electricity than traditional facilities because of energy-intensive servers and advanced cooling systems, often requiring major upgrades to local power grids. Since 2022, investment in power infrastructure has accelerated across the United States, Europe and the Middle East, but supplies of critical power equipment have struggled to keep pace.
Transformers have emerged as one of the most acute bottlenecks. Around 80% of U.S. power transformer supply and 50% of distribution transformer supply are imported, and the country is expected to face shortages of 30% and 10% respectively this year, according to an August report by consultancy Wood Mackenzie. Similar supply constraints are being seen in other major markets.
Chinese manufacturers have moved quickly to fill the gap. Sieyuan Electric, a Shenzhen-listed grid equipment maker, established a U.S. subsidiary last year to tap into the American transformer shortage, despite uncertainty linked to President Donald Trump’s tariff policies. The strategy has paid off, with the company’s shares more than doubling since the start of the year and plans announced last week for a secondary listing in Hong Kong.
The transformer industry’s structural constraints have amplified China’s advantage. Production is labor intensive and relies on specialized winding machines that take years to source, while building new factories and training skilled workers is a lengthy process. These factors make it difficult for global competitors to rapidly expand capacity.
As a result, China’s exports have surged. For the first 11 months of the year, transformer exports reached nearly 58 billion yuan, or $8.2 billion, up 36.3% year on year, according to China Customs. Major Chinese power equipment makers reported export growth that far outpaced domestic expansion. Tebian Electric Apparatus, the world’s largest transformer producer by capacity, posted a nearly 66% jump in international contract value in the first half of the year, compared with 14% growth in its home market.
Analysts say speed has become a defining strength for Chinese suppliers. Matty Zhao, co-head of China equity research at Bank of America Securities, told Nikkei Asia that delivery times from China are typically under a year, compared with two to three years for suppliers in the U.S., Europe, Japan or South Korea.
Industry executives also point to deeper structural shifts. Huang Chao, a marketing manager at Jiangsu Dishin Electrical, told Nikkei Asia that China’s transformer sector has become highly competitive after fully localizing production of silicon steel sheets, a key input that was previously imported. His company already exports to the U.S. and Middle East and sees room to expand further as global shortages persist.
However, Huang cautioned that the export boom is being driven mainly by large players. Smaller manufacturers face challenges ranging from differing technical standards and certification requirements to the need for established sales channels with power utilities. Product quality and price alone, he said, are no longer sufficient to win overseas contracts.
The export momentum is closely tied to runaway AI spending. UBS estimates global AI capital expenditure will reach $423 billion this year and $571 billion in 2026, with total spending projected to exceed $1 trillion by 2030. U.S. hyperscalers such as Alphabet, Meta, Microsoft, Amazon and Oracle are expected to invest as much as $400 billion in AI this year, driving a wave of data center construction and intensifying pressure on power grids.
China’s AI investment remains smaller by comparison, with spending forecast at 600 billion to 700 billion yuan this year, rising to as much as 2.5 trillion yuan by 2030, according to Bank of America. About one-third of that spending is expected to go toward AI infrastructure.
Beyond transformers, China also holds a strong position in energy storage systems, which help data centers manage fluctuating power demand. JP Morgan estimates that global AI-driven demand for energy storage is still small but growing rapidly. In the first 10 months of 2025, global energy storage battery shipments jumped about 70% year on year, driven largely by a 61% surge in China’s exports to major markets.
JP Morgan expects energy storage shipments to grow roughly 80% in 2025 and 30% in 2026, warning that tight supply could push prices higher. Zhao told Nikkei Asia that even as South Korea’s LG expands capacity, growth remains well behind demand, forcing global buyers to continue importing from China.
Chinese companies dominate the global battery market, led by players such as CATL, EVE Energy and BYD. Sungrow, a major maker of battery storage systems and inverters, said it began receiving inquiries from U.S. cloud companies for data center energy storage solutions in October 2025. At an industry forum in Shenzhen earlier this month, executives from leading firms echoed a shared message that China aims to be at the center of global energy storage development.
Looking ahead, analysts expect shortages of key components to persist through at least 2026. Duan Bing, a telecom and technology analyst at Nomura, said rising demand and higher technical barriers will make AI networking equipment and cabling increasingly critical, likely boosting prices and margins for leading suppliers.
Cooling equipment is another area where Chinese exports are poised to grow. Zhao told Nikkei Asia that in Southeast Asia, where data center construction is accelerating, Chinese suppliers play a growing role in cooling infrastructure, particularly as Chinese internet firms build AI facilities in the region to offset chip restrictions and benefit from lower electricity costs.
