Kenanga Research said Monday that data center and cloud boom is expected to benefit multi sectors in Malaysia.
The research house said in a note that as global cloud service providers (CSPs) continue to invest heavily in data centers, cloud, and artificial intelligence (AI) infrastructure in Malaysia, it anticipated a rise in demand for cloud services, which include GPU as-a-Service (GPUaaS).
Contrary to perception, it opined that the data center boom is not creating an oversupply situation, while power supply is not a constraint and has sufficient capacity to meet demand.
“Thus, we believe players involved in various roles within the cloud industry, e.g. cloud service providers (CSP), distributors for global CSPs, managed-cloud service providers, software vendors and system integrators stand to benefit,” it said.
It is noted major tech giants like Amazon, Google and Microsoft, along with other data center operators have announced significant investments in Malaysia.
Cited Tenaga Nasional Berhad (TNB), Kenanga said the utility firm has received over 70 data center project electricity supply applications in Johor and Klang Valley, with a total maximum demand exceeding 11,000 magawatt (MW).
As of June 2024, 26 projects have signed Energy Supply Agreements (ESA), with a total maximum demand of 4,000 MW.
Of these, 16 projects (1,700 MW) have already been completed, and 190MW of DC capacity was operational as of June 2024, up from 150MW in March 2024.
Meanwhile, Kenanga highlighted that cloud demand in Malaysia is boosted by hefty global investments in data center, cloud and AI.
As global cloud service providers (CSPs) continue to invest heavily in data centers, cloud, and AI infrastructure in Malaysia, the research house anticipates a rise in demand for cloud services in this region.
It noted that in recent months, global tech giants have collectively pledged investments exceeding $16.5 billion in these areas.
They include hyperscale CSPs such as AWS ($6.2 billion), Microsoft ($2.2 billion), Google ($2 billion), and Oracle ($6.5 billion).
These investments are expected to catalyze cloud demand – as data centers house the servers that provide storage capacity and compute power essential for cloud service delivery.
It noted theoretically, the increased availability of these resources at scale should drive down costs and improve cloud performance, resulting in more competitive pricing and enhanced service quality.
In turn, this would spur greater adoption and demand from both new and existing cloud customers, it added.
It is noted that global cloud computing firm AWS was the earliest among global CSPs to launch a data center and cloud region in Malaysia.
In August, 2024, AWS announced the general availability of the AWS Asia Pacific (Malaysia) Region, with three Availability Zones.
Each zone comprises one or more discrete data centers with redundant power, networking, and connectivity, housed in separate facilities.
This marks AWS’s first infrastructure region in Malaysia and its thirteenth in the Asia Pacific, joining regions in Hong Kong, Hyderabad, Jakarta, Melbourne, Mumbai, Osaka, Seoul, Singapore, Sydney, Tokyo, and China (Beijing and Ningxia).
AWS expects this new Malaysian region will meet growing demand for cloud services, enable customers with data residency preferences to store data securely in Malaysia, and deliver even lower latency for its users.
According to AWS, cloud adoption in Malaysia has been steadily gaining momentum in recent years. This is reflected in the growing diversity of workloads utilizing AWS’ services in Malaysia.
As such, Kenanga believes that cloud demand in Malaysia is experiencing consistent growth across a broad spectrum of customers, ranging from startups to large enterprises, and government agencies.
Moreover, its channel checks indicate that AWS’ Malaysian customers are modernizing their cloud applications by integrating advanced technologies (e.g. microservices and serverless architectures), while also taking advantage of AWS’s latest capabilities (e.g. ARM-based Graviton chipset).
Some examples of use cases by Malaysian companies for AWS’ Cloud Solutions include the following: (i) Aerodyne: created a data lake using Amazon S3 to store and turn drone data, (e.g. images, satellite, agriculture, and weather data) into actionable insights, (ii) MyDebit (PayNet): implemented Amazon Managed Streaming for Apache Kafka and Amazon Elastic Kubernetes Service that supports near realtime views of settlement positions and ingests millions of e-payment transactions daily, (iii) POS Malaysia: migrated its critical applications from on-premises infrastructure to the AWS Cloud that reduced information technology (IT) costs, improved the development time of new services, and reduced downtime to zero, and (iv) Deriv: implemented the generative AI-powered assistant, Amazon Q Business, across customer support, marketing, and recruiting departments to increase productivity, efficiency, and innovation.
In Kenanga view, over the longer term, vast availability of generative AI (Gen AI) tools on the cloud will drive demand for cloud services.
It also believes local players involved in various roles within the cloud industry, (e.g. CSP, distributors for global CSPs, managed cloud service providers, software vendors and system integrators) stand to benefit from higher adoption and demand for cloud services.
Additionally, it noted these players may further boost earnings and differentiate their offerings by bundling connectivity solutions, (e.g. LAN, WAN, last mile fiber, VPN, private 5G networks), with their integrated cloud offerings.
However, as it is still early days, it believes cloud contribution will remain modest for the larger companies, particularly for the leading mobile network operators.