AI boom fuels record data centre loans in Southeast Asia amid US-China tensions

ASIA: AI advances have sparked a wave of record-breaking loans for data centres in Asia, especially in Malaysia, where the industry is expanding rapidly. According to South China Morning Post (SCMP), in just one week, two major Asian data centre operators secured their biggest-ever loans to support their operations.

Bridge Data Centres, owned by Bain Capital, secured a US$2.8 billion (S$3.7 billion) loan for its Malaysia operations, while DayOne, previously known as GDS International, raised about US$3.4 billion in funding.

Real state services firm Cushman and Wakefield said that data centre demand in Asia is expected to grow by 32% annually through 2028, outpacing the US, which is projected to grow by 18%.

Yemi Tepe, a partner at Morrison Foerster, said, “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.”

Malaysia, particularly Johor, has benefited the most from this surge. Johor, located near Singapore, has about 30 data centre projects completed or under construction, with 20 more awaiting approvals.

Thailand is also seeing growth in this sector, recently approving US$5.9 billion worth of investment applications, including three data-centre projects.

A Singapore-based entity of Australia’s Firmus Technologies is also seeking a US$120 million private loan, while India’s Yotta Data Services is negotiating with private credit funds to raise around US$500 million for its data centre parks. 

With tensions rising between the US and China, many tech multinationals are shifting their operations beyond China. This has led to billions of dollars pouring into Southeast Asia, reshaping local economies.

However, these geopolitical tensions also pose risks to the industry. Ms Tepe noted that these risks could lead to “higher financing costs, lower investor confidence, and increased credit risk for financiers.” She added that investors may demand higher risk premiums or even pull out of projects linked to Chinese entities, which could slow growth in Southeast Asia’s data-centre market. /TISG 

Read also: Microsoft to launch 3 new data centres in Malaysia by mid-year as part of US$2.2B investment