Data center rents in China have “roughly halved over the past five years, to about $40/kW/month excluding power”, while capex fell “about 25% over the same period, to less than $3mm per MW”, according to a SemiAnalysis report on a campus visit in Inner Mongolia published on November 7. By our arithmetic, a year of rent now buys back about a third less of the build cost than it did five years ago.
The report says the market is “highly competitive” and that “Project returns are thin, with IRRs squeezed hard, so the reward often comes from elsewhere”. Our earlier piece covered the Galaxy campus that SemiAnalysis visited; this one looks at the economics behind it.
An evergreen Business Engineer explainer on capex and depreciation. It teaches the general idea only and does not discuss China’s data center market.
The key insight: SemiAnalysis says China’s data center rents have roughly halved in five years to about $40/kW/month, excluding power, while capex fell about 25% to under $3 million per MW. By our arithmetic, a year of rent now covers about a third less of the build cost than five years ago, and a megawatt still earns more than 16% of its build cost a year in gross rent.
SemiAnalysis gives three market prices for China. Rent is about $40 per kilowatt per month, excluding power. Capex is under $3 million per megawatt. And “Power in Inner Mongolia costs about $0.055/kWh all-in, among the lowest in the world”.
It also says the Galaxy campus delivered its first 120MW phase “within a year at a fifth of US costs”, and that “All four phases are built-to-suit for two internet giants”. The free section of the report does not name the two tenants.
China data center rent and capex, indexed to five years ago = 100. SemiAnalysis says rents roughly halved to about $40/kW/month (excluding power) and capex fell about 25% to under $3M per MW. Our arithmetic: rent per dollar of capex = 0.50 / 0.75 = about 0.67. Approximate. Data: SemiAnalysis, 7 Nov 2026.
Our Arithmetic: What a Megawatt Earns
At $40 per kW per month, one megawatt of capacity earns about $480,000 a year in rent ($40 x 1,000 kW x 12 months). Against a build cost of under $3 million per MW, that is a gross rent yield of more than 16% a year, before power, operating costs and financing. This is our arithmetic on SemiAnalysis’s figures.
Running the report’s five-year changes backwards, rent was roughly $80 per kW per month and capex under about $4 million per MW five years ago. Rent fell by about half and capex by about a quarter, so the rent earned per dollar of build cost fell by about a third (0.50 / 0.75 = 0.67). These are approximations, because SemiAnalysis gives the changes as “roughly” and “about”.
Power is the third line. One megawatt drawn around the clock for a year uses 8,760 MWh; at $0.055 per kWh that is about $482,000, close to the year’s rent for the same megawatt. That is our arithmetic at full load; actual draw and the split of power costs between landlord and tenant are not in the report’s free section.
Why Developers Build Anyway
SemiAnalysis describes a pattern across China in which “Industrial groups with an edge in energy, construction or electrical equipment are pivoting into AI infrastructure”. For Galaxy’s owner, Envision Group, which the report says has “more than 100GW of wind turbines installed worldwide”, it says “datacenters create new demand for the power and equipment it already produces”. For many listed companies, it says, “the draw is the stock market”.
The report says Envision’s datacenter plans in Inner Mongolia “add up to 3GW” and that the region “has lined up 25GW of announced datacenter projects”. It compares the strategy to “China’s EV market, where players like BYD make much of what goes into their cars”.
The Business Lever: Cheap Capacity for Tenants
As we read the report, falling rents and thin returns move the gains of China’s buildout toward the tenants, the internet companies renting the halls, while developers look for returns in the equipment and power they sell into the project. That fits SemiAnalysis’s line that the reward “often comes from elsewhere”.
As we read the report, rents falling faster than build costs means more of the value of each new hall goes to the tenant than five years ago.
As we read the report, its line that the reward often comes from elsewhere describes developers that earn on the power and equipment they supply, not on the lease.
As we read the figures, power at about $0.055/kWh matters to the cost of a hall as much as rent: by our arithmetic, a megawatt drawn at full load for a year costs about $482,000 in power, close to its $480,000 of rent.
SemiAnalysis, We Visited China’s Stargate in Inner Mongolia
“Project returns are thin, with IRRs squeezed hard, so the reward often comes from elsewhere”
Three Implications
FOR TENANTS SemiAnalysis says all four of Galaxy’s phases are built-to-suit for two internet giants, which the free section does not name.
FOR DEVELOPERS SemiAnalysis says industrial groups with an edge in energy, construction or electrical equipment are pivoting into AI infrastructure, and that for many listed companies the draw is the stock market.
FOR THE NUMBERS TO WATCH SemiAnalysis says its next report will look at Inner Mongolia’s 25GW of announced projects and what limits development there.
The essay tallies 2026 compute capex at about $1.04 trillion, including “$80B China”, and calls it “the first trillion-dollar year of compute capex in human history”.
As we read it, SemiAnalysis’s figures add a price to the Chinese line: with capex down about 25% per MW in five years, the same spend buys roughly a third more megawatts (1 / 0.75 = 1.33, our arithmetic). The essay does not discuss rents in China.
What Is Not Established
The rent, capex and power figures are SemiAnalysis’s market figures, not audited data, and the report’s free section does not give their sources or ranges. The free section does not name Galaxy’s two tenants or their lease terms. The yield and per-megawatt figures above are our arithmetic and leave out power, operating costs, tax and financing.
This Week In The AI Supercycle
The Great Convergence of Capital, Power, and Geopolitics
This week’s issue: for two years the AI build-out was priced as a supply story, and last week as a credit story. This week it was priced as a permission story, and the answer arrived as a cost, not a ban.
SemiAnalysis says China’s data center rents have roughly halved in five years to about $40/kW/month while capex fell about 25% to under $3 million per MW, with returns described as thin. By our arithmetic, a year of rent now covers about a third less of the build cost than five years ago, and a megawatt still earns more than 16% of its build cost a year in gross rent.
A note on sourcing. The rent, capex and power figures, the quotations and the campus details are from the free section of SemiAnalysis’s report We Visited China’s Stargate in Inner Mongolia (7 November 2026), read on 8 November 2026; the paid section was not read. The yield, five-year and per-megawatt figures are our arithmetic and are approximate.
Gennaro Cuofano is a CRO and tech executive who has worked in AI since late 2015, starting with bringing NLP, natural-language generation, voice and chatbot products to the marketing industry. His background is in law and finance: he holds a Master's degree in Law and an International MBA with an emphasis on corporate finance (LUISS Business School and the University of San Diego, 2012), and worked as a financial analyst at a real-estate investment firm in San Diego and as an assistant controller. His work focuses on business model strategy, business engineering and, more broadly, structural analysis: how companies make money, read from their own filings. He created FourWeekMBA and leads research there and at The Business Engineer, his newsletter on AI and business strategy, with over 95,000 subscribers and more than 1,000 published analyses. His writing has also appeared on Entrepreneur (for example, How to Digitize a Family Business in Europe) and HackerNoon. Find him on LinkedIn and Substack. See how we source.
