AI models are upgrading en masse, domestic computing power demand is soaring, will IDC usher in a new wave of boom?

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Bank of America pointed out that China’s AI industry has reached an extremely critical turning point this week. It is no longer just an arms race over technical parameters, but a real commercialization and explosion of demand. With giants like ByteDance and Zhipu AI intensively releasing new generations of large models, especially breakthroughs in video generation capabilities, computing power demand is growing exponentially.

According to Chasing Wind Trading Desk, on February 12, Bank of America’s latest research report believes that, for investors, the most direct signal does not come from the technical prowess of the models, but from price increases. From Zhipu AI’s significant hike in API prices to UCloud’s across-the-board price increases for public cloud services, a clear signal is being sent to the market: the years-long price war in cloud computing has ended, and pricing power is returning to the sellers.

Bank of America Securities clearly pointed out that this trend will directly benefit China’s data center sector. Against the backdrop of tight supply for computing power, IDC leasing prices are expected to stabilize and rebound, making 21Vianet, GDS, and Kingsoft Cloud the biggest beneficiaries. This represents a re-rating of the infrastructure segment, and investors should realize that large-scale AI inference and training are reshaping IDC valuation logic.

Video Generation Models Ignite Demand for Computing Power; ByteDance and Zhipu Lead the Way

This week, progress in China’s AI field has been dizzying, with major companies competing for technological leadership. The Bank of America Securities report highlights that ByteDance’s release of Seedance 2.0 is not just an iteration—it demonstrates advanced multi-modal capabilities, especially next-generation video generation technology.

Meanwhile, Zhipu AI launched its flagship model GLM-5, achieving significant enhancements in programming and reasoning performance. DeepSeek updated its model to support longer context windows and a refreshed knowledge base, and MiniMax released the M2.5 version for testing on its overseas platform.

These model releases are more than just press bulletins—they directly give rise to a huge gap in computing power supply. The report cites data from the co-founder of Fal.ai, noting that generating a 5-second video clip (24 frames per second) requires about 120,000 times the computing power needed to generate 200 tokens (about 150 characters) of text. This staggering figure means that if ByteDance’s Seedance 2.0 succeeds in driving wide application of video generation, the market demand for token consumption and computing infrastructure will see an exponential leap. For IDC vendors with abundant resources, this is a major fundamental boon.

The Price War Ends: Strong Demand Drives Clouds and Model API Price Increases

The market’s favorite catalyst is "price hikes". The report acutely captures the structural change in the industry’s pricing dynamics. Due to excessively strong demand, Zhipu AI has raised prices for its GLM code program for new users by at least 30%. On the public cloud side, UCloud announced price increases for all products and services for renewals and new orders.

This phenomenon is not isolated, but in line with global trends. Bank of America Securities pointed out that after global peers like Google Cloud and AWS increased prices for some services, Chinese cloud service providers (CSPs) also began to follow suit.

There are two main drivers behind this: one is the rising cost of hardware components (such as memory), and the other is the supply-demand reversal brought by the surge of AI workloads. For public cloud vendors, strong AI demand supports the price system, enabling them to transfer rising hardware costs downstream. For the IDC industry, price hikes by cloud vendors will further stabilize the trend of IDC rental prices, not only marking a bottom for the industry but also heralding the start of a profitability recovery cycle.

Bullish on 21Vianet and GDS: Value Re-rating for Infrastructure Leaders

Based on the above industry logic, Bank of America Securities has reevaluated relevant targets. The report sees 21Vianet as a direct beneficiary of ByteDance’s AI spending. Given 21Vianet’s ample capacity reserves in Ulanqab and its role as a key IDC supplier for ByteDance, if video generation applications take off, 21Vianet will be the first to benefit.

Bank of America Securities raised 21Vianet’s target price from $15.1 to $17.9, raising its valuation multiple to 15x forward 12-month EV/EBITDA, reflecting faster revenue growth prospects.

For GDS, the report also maintains a "Buy" rating and raises the target price from $50.0/49.1 HKD to $56.7/55.6 HKD. Bank of America Securities uses a sum-of-the-parts (SOTP) valuation method: granting its China business (GDS) 14x EV/EBITDA, at a 20% discount to overseas peers; for its international business, a valuation multiple as high as 25x EV/EBITDA is applied. GDS's resource layout in Beijing’s periphery enables it to fully capture incremental demand from domestic leading model companies (such as Zhipu and ByteDance).

Kingsoft Cloud: Long-Term Winner in the Xiaomi Ecosystem

Besides pure IDC players, the report believes Kingsoft Cloud will benefit from the upward cycle of cloud service demand brought by Xiaomi’s “person × vehicle × home” ecosystem strategy in 2026. As Xiaomi’s ecosystem increases demand for AI training, inference, and data services, this will provide Kingsoft Cloud with several years of growth tailwind.

Although the target price remains unchanged at $17.0/8.8 HKD, analysts emphasize that after years of industry-wide price cuts, public cloud pricing dynamics are entering a positive inflection point, and Kingsoft Cloud is well-positioned in this recovery cycle.

According to the report, Kingsoft Cloud is valued at 3x forward 12-month price-to-sales (P/S), reflecting the market’s emphasis on its growth prospects over short-term profitability.

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The above highlights are from Chasing Wind Trading Desk.

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