Maybank Investment Bank said Tuesday that it expects data center demand in ASEAN to increase at 20 percent compound annual growth rate (CAGR) and a potential data center total addressable market (TAM) of $11 billion per year till 2028.

The research house said in a report that its high expectations is underscored by several factors. Firstly, ASEAN is 55 percent to 70 percent underpenetrated in data center supply versus more evolved markets like the United States, China, South Korea and Japan.

Secondly, the rise of artificial intelligence (AI) adding another leg of data center demand growth, which also helps ASEAN companies in the global supply chain.

Thirdly, geopolitics, conducive upstream supply and favorable unit economics are tailwinds for ASEAN to emerge as a global data-center hub.

“Risk of overbuild/supply is overhyped as actual capital commitment is just 40 percent of the theoretical new capacity announcements,” said Maybank.

Beyond data center demand for its own need, the research house sees potential for ASEAN to emerge as a hub for meeting broader Asian/global data center needs.

According to Maybank, ASEAN is emerging as a favorable destination for data centers and subsea cable builds owing to its neutral geopolitical stance and US-China trade
tensions.

While power/water remains a major concern globally, it noted ASEAN is placed favorably with higher power-reserve margins and water-stress levels in line with the global average.

Renewable-energy-addition targets are about ten times of incremental demand for green data centers.

On capital expenditure (capex)/ operating expenditure (opex) economics, ASEAN (exclude Singapore) is 20 percent below the global average on the cost to build and 20 percent to 30 percent lower in terms of power cost, it added.

Meanwhile, despite high vacancy rates in some smaller markets, overall ASEAN colocation vacancies stand at 10 percent, a rate considered healthy and consistent with global norms.

New capacity addition announcements of about 6GW, reflects 3.5 times supply increase. Such builds mainly reflect theoretical capacities based on land availability, not actual capital commitments, said Maybank.

According to the research house, under-construction supplies is just 24 percent of the live supply while committed is 116 percent.

“These suggest, 2.4GW or 1.4x supply increase, although we doubt that even 100 percent of the committed supply goes live,

“The rest of the announcements are in early stage and we think will hit the ground based on demand development,” it added.

Cited Granular analysis, Maybank highlighted that average data center capacities in large markets like Kuala Lumpur and Jakarta are modest at just 9MW/facility versus large announcements in 100MW to GWs.

Maybank also noted that government incentives/favorable regulations will support development of AI and data center sectors in ASEAN.

According to the research house, local governments in various Emerging ASEAN markets are offering incentives to attract data-center operators.

These incentives may include tax breaks, grants and expedited approvals for development projects.

While large tech/cloud companies generally have strong environmental, social, and governance (ESG) profiles, with most hyperscalers aiming for net-zero emissions by 2030, Maybank noted that ASEAN data centers are improving energy efficiency but still lag global standards in power usage effectiveness (PUE).

According to Maybank, green energy sourcing is a significant driver of data center growth and investment, with evolving regulations and the rise of green financing further shaping the industry’s trajectory.

As data centers continue to prioritize sustainability, they are likely to benefit from increased investor interest and potentially lower operating costs due to their use of renewable energy.

“ASEAN data-center operators are upping green commitments, but behind their hyperscale customers’ needs,” said Maybank.

Maybank also highlighted that data-center operators are the most direct winners of the spurt in data center demand.

“We estimate data-center capacity to double in ASEAN from 1.6GW currently to 3.7GW by 2028. Notably, 3 sets of operators are going to tap the demand growth: ASEAN-based data-center operators, regional and global data-center operators and self-builds by cloud companies,” it said.

Maybank also opined that ASEAN telcos, known for running infrastructure heavy and highly regulated businesses alongside connectivity infrastructure, can play a bigger role in ASEAN’s data center space.

Besides data center operations, it noted telcos can benefit on multiple fronts.

In the upstream, telcos can play a role in data center connectivity on the back of their terrestrial and submarine cable infrastructure.

In the downstream segments, multiple telcos in ASEAN are providing in-house and third-party cloud services to their enterprise customers.

Edge computing remains an evolving area, especially once 5G/lag sensitive use cases evolve and telcos can be a natural partner in the space, according to Maybank.

Fueled by AI advancements, increasing demand, and a slowdown in energy efficiency improvements, Maybank said global data center power demand is set to more than double by 2030.

“While the AI revolution has attracted investor interest, we believe downstream investment opportunities in utilities, renewable energy, and industrial sectors — key to supporting this growth — are still underappreciated,” it said.

It noted technology companies are likely to increase their involvement in power purchase agreements, where they contract to buy electricity from utilities or independent power producers for renewable energy.

It also said demand for green energy is high, but supply ramp-up will take a while in ASEAN.

Macquarie sees Malaysia as key ASEAN data center growth market