U.S. data center buildout faces China equipment exposure as AI demand rises

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U.S. data center China exposure

Highlights

President Trump’s executive order enables the Energy Department to block foreign bulk-power equipment transactions, heightening scrutiny of China-linked components in U.S. data centers.
Chinese suppliers hold nearly 30% of U.S. transformer and switchgear imports and more than 40% of U.S. battery imports, increasing supply chain vulnerability as AI-driven infrastructure grows.
S&P Global forecasts U.S. data center capacity will surge from 62 GW in March 2026 to 152 GW by 2030, raising strategic risks as reliance on Chinese equipment persists.

Policy pressure on data center supply chains

As reported by CNBC, U.S. reliance on China-linked components for data center power systems is drawing greater attention as the White House moves to tighten oversight of foreign equipment used in critical infrastructure.

President Donald Trump signed an executive order last week declaring a national emergency tied to what it called an extraordinary foreign threat involving bulk-power system equipment produced abroad. The order authorizes the Energy Department to prohibit or place conditions on certain transactions involving components used in the grid and in data centers.

The policy shift comes as U.S. and Chinese competition over AI intensifies and as American hyperscalers race to build multibillion-dollar facilities. Analysts cited by CNBC say Chinese suppliers account for meaningful shares of equipment categories such as transformers, switchgear, batteries and optical technology, leaving the U.S. exposed to cost increases and supply disruptions if restrictions tighten further.

Laveena Iyer, senior analyst at The Economist Group, said scrutiny of China's role in the U.S. data center power stack has increased over the past eight months, expanding concerns beyond the compute stack. The power stack includes systems that keep facilities operating with minimal downtime, including transformers that step down grid voltage, switchgear that manages electrical distribution and batteries that provide backup power.

Capacity growth raises strategic and cost risks

Ben Boucher, senior analyst for supply chain at Wood Mackenzie, said the AI infrastructure buildout is becoming increasingly dependent on Chinese imports in several key areas. He said China's share in some transformer and switchgear categories is near 30%, while the country accounts for more than 40% of U.S. battery imports, with additional upstream exposure in copper, electrical steel and battery cathode materials.

Optical networking is another area of concentration. Counterpoint says Chinese companies dominate the global data center optical transceiver market, with Zhongji Innolight and Eoptolink among the leaders in revenue, underscoring how reliance extends beyond electrical hardware into high-speed communications gear.

The exposure matters as U.S. data center capacity is forecast to expand sharply. S&P Global said in June that capacity is expected to grow from 62 GW in March 2026 to 152 GW by 2030, driven by high-density AI workloads, suggesting any disruption in equipment sourcing could ripple through project timelines and construction costs.

The White House says reducing dependence on foreign suppliers remains central to its industrial strategy. In comments to CNBC, a spokesperson said reshoring manufacturing tied to national and economic security is a priority and pointed to investments across sectors including steel, semiconductors and autos as evidence that the administration's approach is gaining traction.

Our earlier report on U.S. lawmakers’ push to secure critical minerals highlighted how Washington is seeking to reduce reliance on China for inputs that underpin manufacturing, defense, electronics, and energy. It detailed congressional interest in partnerships with Central Asian countries such as Kazakhstan, Uzbekistan, and Mongolia to diversify sources of uranium and other key resources, while also flagging policy hurdles that can slow deeper trade ties.

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