VNET Seeing Strong Demand for Wholesale Data Centers Driven by AI

We expect VNET Group to continue to purchase and build data centers in and around its focus Tier 1 Chinese cities of Shanghai, Beijing, Shenzhen, and Guangzhou. As its network of interconnected data centers grows it can more easily cater to the demand from its key cloud service provider customers allowing them to expand in a flexible way in their key markets. This also enables key enterprise customers to deploy their hybrid clouds in close proximity to the networked nodes of leading public clouds. We also expect VNET to compliment its basic data center offerings with value added services such as managed hosting, cloud, and VPN services. In the near term, demand for its services may be somewhat affected by increased cost focus from large internet company customers, macro conditions, chip shortages, and covid-19 shutdowns. However, we remain confident on the longer-term demand for data centers in China as the country continues to revolutionize its operations in a digital fashion across government and private sectors.