[KUALA LUMPUR] Artificial intelligence advances are fuelling a funding frenzy for data centres in Asia, spawning a series of record-breaking loans and filling the pipeline with even more potential deals.
In the span of a week, two major Asian data centre operators secured their biggest-ever loans, partly earmarked for the expansion of their operations in Malaysia, which is becoming a hub for these facilities.
The deals underscore the industry’s appeal in attracting a range of investors – from banks to real estate players – as the AI boom drives demand. They also show how much of a data centre hotspot Asia has become, with demand set to expand by about 32 per cent a year through 2028, according to data by real state services firm Cushman and Wakefield, outpacing the US’ expected growth of 18 per cent. Though US tariff policy could be a wild card for the industry.
“The surge in demand for data centre capacity has piqued the interest of an ever-growing diverse pool of capital investors and providers across Asia Pacific,” said Yemi Tepe, a partner at law firm Morrison Foerster, who has worked on tech-related financial transactions. Banks have historically been the main source of funding for large scale projects, but the emergence of private credit and infrastructure funds have expanded financing avenues, said Tepe.
Among the recent financings, Bain Capital-owned Bridge Data Centres obtained a US$2.8 billion facility for its operations in Malaysia, while DayOne, formerly known as GDS International, launched a US$3.4 billion-equivalent borrowing into market.
There are more potential Asia Pacific deals on the horizon. A Singapore operating entity of Australia’s Firmus Technologies is seeking a US$120 million private loan, while India’s Yotta Data Services is in talks with private credit funds to raise about US$500 million for its data centre parks.
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Moreover, with tensions between Beijing and Washington escalating, tech multinationals are now diversifying beyond China. Hundreds of billions of dollars of investments are pouring into towns in South-east Asia and reshaping the local economies there.
Malaysia’s southern state of Johor, bordering Singapore, has been a major beneficiary of the flood of funding. The state has about 30 data centre projects completed or under construction, plus 20 more awaiting approvals. Elsewhere, Thailand approved investment applications worth US$5.9 billion last week, including three projects targeting the sector.
Still, the industry faces uncertainties as the US readies more tariffs and the risk of a wider trade war rises. Likely targets include countries that supply the data centre industry – largely in Asia – as well as some of the key components it relies on, like semiconductors. Projects could also face holdups if supply chains are disrupted.
“These geopolitical risks could lead to higher financing costs, lower investor confidence, and increased credit risk for financiers,” said Tepe. “Consequently, investors may demand higher risk premiums or choose to divest from projects tied to Chinese entities, potentially stalling growth in the South-east Asian data centre market.” BLOOMBERG
