BMI Country Risk and Industry Research said hyperscale opportunities are driving Philippines market convergence while Malaysia maintains regional leadership.

The research house said in a note on Tuesday that as Alibaba Cloud will increase its presence in Southeast Asia, with data centers planned in Malaysia and the Philippines, it sees Malaysia remains popular as a destination for digital infrastructure investment, as demand continues to shift away from Singapore.

While the Philippines lags behind in terms of capacity fundamentals, it said the country continues to leverage its geographic location as a gateway from Pacific subsea cables or Pacific traffic to the rest of Southeast Asia.

“Malaysia continues to lead among the emerging Southeast Asia markets, following the surge of investment that Johor has seen over the past year,

“As such, our estimates show over 3.2GW of planned capacity coming to market in Malaysia, the most among our sample. This is followed by Indonesia, with 1.8GW and the Philippines significantly lags, with just under 180MW of planned capacity,” it said.

BMI also noted that Johor will likely continue to stay the prominent hub for investment, with more investment into this area expected to be driven by the new Singapore economic zone (SEZ).

This would likely introduce more industrial parks down the line in Johor and more areas that are more easily acquired to build new data centers.

During Alibaba Group’s first quarter 2025 earnings, the firm announced its plans to scale its artificial intelligence (AI) investments with a $53 billion investment into cloud and AI infrastructure in the next three years.

Alibaba is a large revenue driver for data center platforms in China, with 12 availability zones in Beijing alone, but has also held an interest in emerging Southeast Asia ex-Mainland China.

Alibaba Cloud offers cloud regions in Kuala Lumpur, Malaysia (three availability zones released in 2017) and Manila, Philippines (one availability zone released in 2021).

“While the Philippines lags in terms of data center fundamentals, perhaps the potential for this market involves closing the gap between itself and the leading markets in emerging Southeast Asia,” BMI noted.

According to the research house, data center facilities within this market capitalize on both enterprise and hyperscale opportunities with developers such as STT and ePLDT Vitro having a presence within this market.

BMI, however, noted that power continues to be the leading issue for many markets in Southeast Asia, with data center developers looking to procure power by signing renewable energy deals.

Most recently, this includes Digital Edge signing a hydroelectric energy deal with First Gen Corporation, to directly supply electricity to support its NARR1 data center in Manila.

This follows solar power projects announced in 2024, in support of alternative energy sources as a method to procure the required power for data center operations.

“Because power purchase agreements (PPAs) and renewable matching commitments are becoming integral to data centre firms’ operating models, we believe that future construction and facility delivery be planned in tandem with power projects,” said BMI.

According to the research house, increased cloud computing demands (in both distribution management system [DMs] and energy management systems [EMs]) and the proliferation of
AI use-cases (predominantly in DMs) means there is a growing number of bidders looking to bid for contracts to supply power to new facilities.

“Unless data center platforms become actively involved with buying and sponsoring power projects to secure exclusivity, this becomes a problem,

“Therefore, in the cases where the projects are sponsored by a utilities company, the power source will be open to many bidders and sub-optimal for data center platforms,” it added.

Alibaba Cloud announces new data centers in Malaysia, the Philippines