WITH artificial intelligence (AI) being the new data centre (DC) goldmine, supply glut risks are possibly exaggerated, hence Malaysia’s emergence as the largest DC hub in the ASEAN region can be deemed sustainable to say the least.
Against such backdrop, RHB Research expects approvals for DC investments to hit another high in 2024 ahead of the guidelines to be enacted on new builds with the investment pipeline looking strong going into 2025.
“The domestic DC landscape has gotten a big shot in the arm with hyperscalers committed to setting up their cloud regions,” the research house pointed out in a telco sector report focused on DCs.
“The multi-billion-ringgit investments acts as a strong funnel for growth, adding to the investments by wholesale co-location providers.
‘We see the strong commercial proposition of DCs spawning more M&As (merger & acquisitions) and/or strategic partnerships across multiple stakeholders, thus fuelling an expansion in transaction multiples.”
As it is, RHB Research noted that even agricultural land owners are warming to diversification opportunities in light of declining yields from traditional crops.
According to data centre market intelligence DC Byte, Malaysia can expect more than 1GW of supply to come on stream over the next two years from the current installed capacity of under 400MW.
“About 3GW of capacity is in the developmental stages and will be added progressively over the next three to five years,” envisages the research house. “Potential DC inventory by 2028 would be 10 times more than what it took the industry to build over the last two decades.
“This would put Malaysia ahead of Singapore, Asia’s largest DC metro where capacity is projected to stabilise at 1.4GW due to land scarcity and stricter conditions imposed on new builds.”
With accelerated adoption of AI catalysing demand for scalable DC infrastructure, RHB Research contended that the prolific cycle of investments should downplay growing concerns over an inventory oversupply.
“The risks of a supply glut should also be mitigated by data compliance and residency requirements, modular expansion undertaken by DC owners and the need for older facilities to be retrofitted to meet current needs,” opined the research outfit.
“(Meanwhile), the strain on power grids and water are well-documented DC risk factors on top of regulatory-typed pitfalls with new guidelines on sustainable DC development addressing longer term concerns on the usage of valuable resources.”
Moving up the economic value chain, RHB Research said a 2022 study by Oxford Economics (OE) revealed that over 20,000 jobs were created in Europe by Google’s investments in DCs. More than 60% of jobs relate to capital investments are staggered across sectors.
“We see DC investments as a catalytic enabler to raise Malaysia’s economic complexity and move up the technology ladder,” reckoned the research house.
“The timely development of the Johor-Singapore Special Economic Zone (JS-SEZ) is a potent stimulus, providing a fecund ground for DCs to thrive.” – Oct 2, 2024
Main image credit: USNet
