MIDF Research said Monday that it sees limited impacts on Malaysia’s data centers despite Malaysia and Thailand may be on US’s artificial intelligence (AI) chips restriction list.
The research house said in a note that it expects this latest development to draw mixed reactions among investors but its optimism on the pipeline of data center buildups remains.
“We view that this is in line with our opinion back in May when Biden’s AI Diffusion Rule was rescinded, which is good news for tech giants as they may no longer be tied down to
the 7 percent restriction of AI computing power to any country outside Tier 1, which allows for more AI capacities to be planned in other countries such as Malaysia,” it said.
This means that for giants such as Google, Microsoft and Amazon Web Services (AWS), which are crucial names for the hyperscale builds in Malaysia, are not expected to see much
hindrance in exporting advanced AI chips to the country.
Even for Malaysia-based YTL Power International, which has an exclusive partnership with NVIDIA, MIDF noted it is not expected to be severely impacted for future AI data center builds.
“It is expected to launch its first 20MW AI data center in Kulai next month and we believe the servers with the latest Blackwell GB200 are currently being installed at site, if not already fully set up,” it said.
Bloomberg, citing anonymous sources, reported that Trump’s administration is planning to restrict shipments of AI chips to Malaysia and Thailand in a move to prevent suspected smuggling into China through intermediaries. It is unclear for now whether this will involve more countries.
The is part of the draft rule that is meant to replace Biden’s Framework of AI Diffusion that was rescinded in May-25. The revised rule has yet to be finalized and could still change.
The new export curbs will, however, include measures to help companies with significant business operations in Malaysia and Thailand keep their projects on track.
Among these measures are a grace period for firms headquartered in the US and “a few dozen friendly nations” to continue shipping AI chips to both countries without a license for a few months after the rule is published.
Even after the grace period ends, the license requirements will include certain exemptions to prevent supply chain disruptions.
According to MIDF, data center builds in Malaysia may accelerate.
For the research house, it is also plausible that hyperscale operators and major cloud providers may accelerate their data center builds and rush orders for high-end AI chips now, especially before Trump’s refashioned AI Diffusion Rule is officially announced, up until before the grace period ends.
Those with AI ambitions will want to ensure that their racks are locked and loaded with the most advanced chips before the licensing regime begins, it said.
Last month, a Malaysian contractor noted that there was a slight acceleration in project award timelines and added that clients may potentially move more capacity buildups to Malaysia due to the US tariffs.
As a background, the AI Diffusion Rule, was introduced during the final days of the Biden-Harris administration, which essentially puts in place restrictions for the exports of US-manufactured AI chips and controls on AI model weights through a three-tier country system.
The rule was eventually rescinded by the Trump administration, just two days before it was supposed to be enforced.
The Bureau of Industry and Security (BIS) stated that the rule would have stifled American innovation and saddled companies with burdensome new regulatory requirements and undermine US’ diplomatic relations with dozens of countries by downgrading them to second-tier status.
The BIS also issued three guidance documents after rescinding the rule, on the risks of using China’s advanced computing integrated chips (ICs); consequences of allowing US AI chips to be used for training and inference of Chinese AI models and how to protect supply chains against diversion tactics.
As the Trump administration refashions the AI Diffusion Rule, among speculations include replacing the three-tiered country system with a licensing regime based on government to government (G2G) agreements.
“Regardless of the changes, we believe the essence of it remains, which is to contain China’s AI advancement,” MIDF said.
As far as Malaysia is concerned, it expects negotiations to revolve around the regulation and enforcement on the movement of US-made AI chips, the monitoring of its end-users and its seriousness in dealing with those that violate the control measures.
It is noted that Malaysia was in the spotlight recently when the Wall Street Journal reported that four engineers from Beijing flew to Malaysia in March, each carrying a suitcase containing 80TB of hard drives containing spreadsheets, images and video clips for training an AI model using 300 servers rented at a Malaysian data center.
Since January, MIDF has always reiterated the point that while most new data centers are AI-ready, they may eventually be utilized for non-AI purposes.
A case in point is YTL Power, which had previously allocated 100MW for AI, of which the first 20MW is expected to be launched next month.
According to MIDF, the remaining 80MW had since been converted into a colocation data center due to a shift in market landscape that saw a rush for colocation space.
Even among AI-focused facilities, not all would need the top of the range GPUs.
Analyst: Malaysia’s data center interest revives after US AI regulation rollback