Data center infrastructure spending is still accelerating in Malaysia, with capacity pipeline in the country expected to reach 7.5GW over the next five to ten years, Maybank Investment Bank said on Monday.

The research house said in a note that its in-house tracking —drawing on news flow and industry channel checks — suggests a broadly consistent pipeline of 6.9–8 GW.

“Notably, the pipeline is increasingly anchored by major U.S.
hyperscalers, underscoring growing confidence in Malaysia as a regional data center hub,” it said.

During the first quarter of FY26 earnings season, major tech giants including Microsoft, Alphabet, and Amazon signaled robust artificial intelligence (AI) infrastructure capital expenditure (capex) plans.

“Combined capex is projected to reach a record $570 billion to $580 billion in 2026 (+71 percent year on year), the sustained uplift in AI deployment spending is expected to underpin ongoing global data center buildout momentum,” said the research house.

It is noted that data center projects got onto the radar of investors in 2024, as Malaysia established itself as a leading data center hotspot within ASEAN.

This momentum has been driven by supportive investment policies, ample land and resource availability, and a compelling cost advantage.

Between 2021 and mid-2025, Malaysian Investment Development Authority (MIDA) has approved MYR 144.4 billion ($36.77 billion) in data center and cloud computing investments.

This surge in commitments translated into a corresponding uptick in construction activity, with DC-related contract awards rising in tandem.

In 2024, local listed contractors secured MYR 7.9 billion ($2.01 billion) in data center contracts.

This momentum carried into 2025, with awards surging 56.5 percent year-on-year to MYR 12.4 billion ($3.16 billion).

Year to date 2026 data center related contract awards have reached MYR 7.4 billion ($1.88 billion), indicating strong momentum and suggesting the potential to surpass 2025 levels on an annualized basis.

“We believe the dataset still provide a good gauge onto overall data center build-up momentum in Malaysia which has been robust,” said Maybank.

However, with the robust pipeline of data center investments flowing into Malaysia and as concerns mount over high water and electricity consumption associated with data center, it noted the Malaysia authority is becoming increasingly selective in approving new developments.

Priority is shifting toward projects that support AI advancement and demonstrate high energy and resource efficiency, while less efficient facilities face greater scrutiny.

For instance, it was reported that Johor will no longer approve Tier 1 and 2 data centers, which consume about 200x more water than Tier 3 and Tier 4 data centers.

That said, industry checks indicate that high-efficiency data center projects, particularly those backed by U.S. hyperscalers continue to secure approvals for expansion, reflecting their alignment with Malaysia’s evolving regulatory and sustainability priorities.

The research house positive view on the continuous ramp up in Malaysia data center pipeline is also premised on the growing electricity supply agreements (ESAs) signed pipeline with Malaysia’s state-owned utility firm Tenage Nasional Berhad (TNB), reflecting sufficient electricity capacity by TNB to reserve and deliver to project sites.

It noted quarterly new ESA signings have also been encouraging, with the sole exception for the second quarter of 2025, which it believes could be due to earlier uncertainties over AI diffusion act.

The research house also anticipated a near-term addressable market of MYR 43.8 billion ($11.15 billion) for the mechanical, electrical, and plumbing system (MEP) sector over the next one to–three years.

This is primarily driven by the energization gap between 4.5GW of grid-ready data center projects and the current actual load utilization of just 850MW.

In the near term, it expects an acceleration in MEP related work packages award in the second quarter of 2026 supported by the award of subcontracting works for the MYR 10.3 billion ($2.62 billion) main con packages that were awarded across 2025.

Based on typical project sequencing, MEP packages are usually awarded 6–12 months post site mobilization, following completion of early-stage earthworks and substructure works.

According to Dgtl Infra, MEP work scope typically takes up about 60 percent of overall data center construction package, with electrical systems work scope taking up a bigger portion (40 percent to 45 percent of construction cost) as compared to mechanical systems work scope, this positions electrical system subcontractors the key beneficiaries of overall data center investment upcycle.

Beyond the substantial pipeline of internal MEP fit-out works, it said the influx of data center investments is also generating significant opportunities for contractors in the power infrastructure segment.

This is because data center developments typically require the construction of consumer landing stations/substations (CLS) to
establish grid connectivity.

With the second wave of data centers primarily driven by the expansion phases of international hyperscalers with high redundancy design specifications, it opined that there is a notable increase in the rollout of 275kV CLS projects.

Maybank also sees the trend of ramping up water infrastructure amid data center boom.

With the robust pipeline of DC under development especially in Johor and Selangor, the research house gathered there are several water treatment plants (WTPs) in the pipeline to bolster water reserve margins.

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