Chinese Suppliers Dominate Critical U.S. AI Data Center Components

Chinese manufacturing underpins U.S. AI infrastructure

As American companies race to build multibillion-dollar AI data centers, a strategic vulnerability is coming into sharper focus: Chinese manufacturers supply critical components that keep these facilities running.

Chinese firms provide approximately 30% of certain transformer and switchgear categories used in U.S. data centers, and account for more than 40% of battery imports, according to research from Johns Hopkins University shared with CNBC. In optical transceivers—devices that transmit data at high speed through fiber-optic cables—Chinese companies including Zhongji Innolight and Eoptolink control roughly two-thirds of global unit supply, Counterpoint Research reports.

These dependencies span the entire power stack: transformers that step down high-voltage electricity, switchgear systems with circuit breakers and fuses, backup batteries, and the optical technology that connects data centers. Upstream exposure extends to copper, electrical steel, and battery cathode materials.

Why it matters

The AI infrastructure buildout represents a collision between economic necessity and national security policy. U.S. data center capacity is forecast to grow from 62 gigawatts in March 2026 to 152 gigawatts by 2030, driven by high-density AI workloads. But the components needed to support that expansion come largely from a geopolitical rival, creating potential leverage points in the U.S.-China technology competition. Any disruption—whether through policy restrictions, supply chain shocks, or deliberate interference—could slow the AI deployment that both governments view as strategically essential.

Trump administration moves to reduce reliance

President Donald Trump signed an executive order in late August 2026 declaring a national emergency over the "extraordinary foreign threat" posed by foreign-made bulk-power system equipment. The order authorizes the Energy Department to prohibit or impose conditions on transactions involving grid and data center components.

"The rapid growth of advanced manufacturing, data centers, artificial intelligence, and defense production has increased the Nation's dependence on abundant, reliable electricity," Trump stated, adding that the threat has become "even more acute" since his first term.

The Federal Communications Commission added foreign-made power inverters to its Covered List in July, designating them as unacceptable national security risks. The administration is also reportedly drafting a ban on imports of new Chinese optical transceivers.

Supply chain constraints loom

Replacing Chinese manufacturing capacity will prove challenging. Power transformers and substations already face estimated market shortages of 15% and 8% respectively in 2026, according to Wood Mackenzie. Restrictions on Chinese units would intensify these bottlenecks, particularly in the 100 MVA-plus segment where data centers have relied on Chinese manufacturers to manage lead times.

Western optical technology firms like Coherent and Lumentum—each of which received $2 billion investments from Nvidia in March—possess advanced designs but "currently lack the cleanroom capacity, automated packaging infrastructure, and yield scale required to absorb Innolight and Eoptolink's volume within a 12-to-24-month horizon," according to Counterpoint analyst Neil Shah.

Some domestic expansion is underway. Hitachi Energy announced a $1 billion investment in September 2025 to expand U.S. production of grid infrastructure, including $457 million for a large power transformer facility. Siemens Energy committed $1 billion in February for U.S. production of grid and gas turbine equipment.

But analysts warn that hyperscalers seeking alternatives to Chinese suppliers will likely face higher costs and extended timelines—a scenario reminiscent of the 5G rollout, where removing Chinese telecom equipment led to network delays and rising expenses.

These details were first reported by CNBC.