ASEAN races to attract data-centre investment as spending nears US$30bn

Southeast Asia is emerging as one of the key battlegrounds in the global data-centre industry, as demand for data processing and artificial intelligence rises rapidly.

Data from an energy cooperation organisation show that the region currently has more than 2,000 data centres in operation, covering Indonesia, Malaysia, Singapore, Thailand, Vietnam and the Philippines.

At the same time, investment in the region’s data-centre sector is expected to continue rising and could reach US$30 billion by 2030. This has prompted ASEAN countries to accelerate strategies to attract investment and build competitive advantages.

Singapore still leads, but faces land constraints

Singapore remains the region’s data-centre leader, with existing installed capacity of around 1 gigawatt (GW). However, land constraints have forced the government to control expansion more strictly.

Under the second round of applications for data-centre electricity capacity, or DC-CFA2, which closed on March 31, 2026, only an additional 200 megawatts (MW) of capacity was allowed. The scheme also sets strict energy-efficiency requirements, including a PUE below 1.25.

Amid these limitations, Singapore is shifting its role towards becoming a strategic data command centre and financial control hub, rather than hosting massive AI processing workloads.

Nevertheless, investment continues to flow into the country. Microsoft announced an additional US$5.5 billion investment in Singapore in early 2026.

Malaysia becomes regional AI processing hub

Singapore’s constraints have benefited Malaysia, particularly Johor, which has become a key destination for data-centre expansion.

Malaysia currently has more than 500 data centres in operation and more than 300 under construction.

However, the Malaysian government has begun expressing concern over water and electricity constraints. The prime minister announced a suspension of applications for data centres not linked to AI technology from February 2026.

In the 2026 budget, the government also allocated around US$490 million to develop the country’s Sovereign AI Cloud, aimed at strengthening data security and preventing the leakage of citizens’ information.

To support rising electricity demand, Malaysia plans to add another 8GW of gas-fired power generation and has announced the revival of its nuclear energy programme, targeting the launch of its first nuclear power plant in 2031.

Indonesia grows rapidly on large domestic market

Indonesia remains another important market in the region. With a population of more than 280 million, its cloud market has grown at an average rate of 48% per year over the past five years.

Most investment is concentrated in the outskirts of Jakarta. DCI Indonesia is expanding its capacity from 83MW to 1,000MW.

Meanwhile, BDx Data Centers is operating a 500MW data centre in West Java to serve hyperscale demand.

Vietnam highlights AI laws and infrastructure

Vietnam is one of the most regulation-ready countries in the region, having implemented a dedicated Standalone AI Law since March 2026.

The law sets out a risk-assessment framework and establishes a fund to promote AI infrastructure.

On the data-centre operator side, rising data traffic has prompted Viettel IDC, a joint venture between Viettel and Chunghwa Telecom, to prepare for a stock-market listing within 2026.

Philippines draws attention from global players

Although the Philippines is still in the early stages of developing its data-centre industry, the country has begun attracting more interest after Equinix acquired the data-centre business of Total Information Management.

At the same time, the Philippines is moving ahead with efforts to revive the Bataan nuclear power plant to increase electricity generation capacity for future high-tech industries and data centres.

Three key trends in data-centre M&A

Assessments by financial institutions and research groups show that Southeast Asia’s data-centre market in 2026 is likely to see three notable forms of mergers and acquisitions.

The first is investment in platforms with networks across multiple countries. These command premium valuations of 25-35 times EBITDA because they offer long-term access to land and power infrastructure.

The second is taking partial stakes before expanding to full control. This has become a standard approach for foreign investors seeking to reduce licensing and land-expropriation risks.

The third is the separation of data-centre businesses from telecoms operations, allowing companies to raise capital more flexibly and build global partnerships.

AI drives power demand, creating global energy bottlenecks

The growth of AI is facing a major constraint from electricity generation and transmission systems around the world.

In parts of the United States, some data-centre operators face waits of 10-12 years to connect to the power grid, due to delays in environmental approvals and regulatory requirements for electricity networks.

The problem has been worsened by shortages of critical materials, such as steel for transformer cores, as well as lead times of up to four years for high-voltage transformers because of bottlenecks in global supply chains.

Big Tech moves to generate its own power

To avoid long waits for grid connection, major cloud providers are increasingly investing in on-site power generation.

One increasingly popular technology is solid oxide fuel cells from Bloom Energy, which can install power-generation systems within 55-90 days.

However, these systems still rely mainly on natural gas and continue to emit carbon dioxide into the atmosphere.

In another approach, Google and Xcel Energy have procured a combined 1.6GW of wind and solar power, while also investing in Form Energy’s 300MW/30GWh iron-air battery project, which can provide continuous electricity for up to 100 hours.

Meanwhile, TSMC has signed a 30-year power purchase agreement with the Hai Long offshore wind project, with capacity of 294MW, to support its sustainability targets.

Data-centre industry faces growing environmental pressure

Despite investment in renewable energy, most data centres still rely on natural gas and coal-fired power plants to maintain service continuity.

Estimates indicate that a large data centre uses an average of 5 million gallons of cooling water per day, equivalent to the daily water use of around 50,000 people.

Water use and the expansion of gas-fired power generation have led to growing opposition from environmental groups and local communities.

One notable example is a draft law in Pennsylvania proposing a three-year moratorium on the construction of data centres larger than 20MW, in order to protect water resources and maintain electricity-price stability for residents.

Europe accelerates cooling technology for AI era

In Europe, heatwaves and energy constraints caused by the war in Ukraine and the Middle East have forced the data-centre industry to accelerate upgrades to cooling systems.

Data from the Datacloud Global Congress 2026 show that installing liquid cooling systems for high-density processing chips costs US$1.80-2.40 per watt, raising project construction costs by around 18-22% compared with conventional systems.

This has pushed operators to spread investment away from the core FLAP markets — Frankfurt, London, Amsterdam and Paris — towards cooler locations such as Scandinavia and southern Europe.

At the same time, the industry is accelerating the development of technologies that reuse waste heat from servers, supporting more efficient energy use.