Southeast Asia Emerges as Global Data Center Hot Spot
In the world of AI, data centers, though not as widely recognized as components like LLM or GPUs, form the backbone of AI computational infrastructure. Without these data centers, AI models would not be able to operate effectively. As AI services grow in popularity, data centers have emerged as a hot investment area.
According to Data Center Map, there are 8,042 data centers worldwide, with the largest number located in the United States (2,997). The second-largest concentration is in Germany (393), followed by the UK (377), and India (248).
Between 2018 and 2023, data centers in the Americas saw a compound annual growth rate (CAGR) of 16.7%, while EMEA (Europe, Middle East, and Africa) had a CAGR of 13.6%. The highest growth rate was in the APAC region (Asia-Pacific), with a CAGR of 19.1%. Despite India surpassing Japan in the number of data centers, Japan leads the region in operational megawatt capacity, followed by Singapore and India.
Although ASEAN countries currently do not rank among the top ten in the global data center list, Southeast Asia has emerged as one of the fastest-growing markets. Most new data centers being built in this region are designed to support AI services.
Within the Asia-Pacific (APAC) region, Singapore ranks as the third-largest data center hub, following Tokyo and Sydney. The AI data center market is particularly booming in Southeast Asia. According to DC Byte’s 2024 Global Data Centre Index, Johor Bahru in Malaysia has become the fastest-growing data center market in Southeast Asia over the past year. With the region’s governments actively pursuing AI development, Johor Bahru has indirectly benefited and emerged as a key AI data center hub.
Several tech giants are already deploying significant investments in Southeast Asia. For instance, Microsoft announced a USD$2.2 billion investment in Malaysia in June 2024. Nvidia is teaming up with YTL to invest USD$4.3 billion in the region, and Google has also revealed plans for a USD$2 billion data center investment in Malaysia.
These investments underline Southeast Asia’s strategic importance in AI infrastructure growth. The table below outlines current investments by major tech giants in the region (based on available information).
Among the top countries in Southeast Asia for data center investment, Malaysia leads, followed by Singapore, with other notable markets including Thailand, Vietnam, and Indonesia. Southeast Asia has emerged as a critical hub for AI data centers due to several key factors:
1. Growing Population and Economic Potential: Southeast Asia is home to a large and rapidly growing population, making it an attractive market for future AI demand. As economies in the region continue to expand, the need for AI services is expected to surge. This potential has prompted tech giants to invest heavily in AI infrastructure here.
2. Energy and Land Resources: AI data centers require vast amounts of electricity and space. Southeast Asia, with its relatively low energy costs and available land, especially in countries like Malaysia, is well-suited to support these high-demand facilities. Cities like Johor, Malaysia, have become key locations because of their ability to provide cheap energy and ample land.
3. Geopolitical Stability: Compared to other regions, Southeast Asia is relatively neutral in geopolitical conflicts, with a lower risk of war or major political instability. This makes it an attractive location for long-term investments in AI infrastructure, as businesses prioritize regions with stable environments for their operations.
4. Proximity and Spillover from Singapore: While Singapore is a leading data center hub in SEA, its small size and lack of local energy resources limit its capacity for more large-scale data centers. As a result, nearby locations like Johor Bahru in Malaysia have benefited from this overflow, attracting major foreign investment.
5. Government Support and Policy: The Malaysian government, in particular, has embraced AI and digitalization through various policies, providing incentives to attract international tech giants. This proactive stance has further cemented Malaysia’s position as a leading AI data center destination.
In Southeast Asia, Singapore is undoubtedly the leading data center hub, thanks to its advanced infrastructure, political stability, and strategic position as a global tech and financial center. However, Malaysia is rapidly catching up due to several key developments driven by its government’s proactive approach to fostering AI and digital transformation.
Recent significant investments by tech giants such as Microsoft, Nvidia, and Google underscore this trend, with billions of dollars being allocated to build AI-specific data centers. These data centers will not only support AI applications but also serve as catalysts for Malaysia’s own digital economy.
With major AI data centers being established, Malaysia is poised for a massive boost in its digital transformation efforts. The increase in computational power, coupled with favorable energy prices and government support, positions Malaysia as a future key player in the AI sector within the region. The country’s strategic location, especially in areas like Johor, which benefits from its proximity to Singapore, will continue to attract foreign investments and make it an AI development area that cannot be overlooked. Nonetheless, this AI Data Center frenzy in Malaysia has also led the government to step up and propose closer regulation of the developments, in order to better manage land zoning and power and water consumption towards more sustainable development goals.
