Moody’s Ratings expects South and Southeast Asia’s data center will grow at a compound annual growth rate (CAGR) of 24 percent over the next four to five years, subject to power and permitting constraints.
The rating agency said in a note on Monday that South and Southeast Asia (S&SEA) accounts for over 3.5 GW of data center operational capacity globally.
“With capacity set to double by 2030, growth will increasingly disperse to emerging markets such as India, Malaysia, Indonesia, Thailand and Vietnam,” it said.
It opined that Southeast Asian markets benefit from a mix of expanding domestic demand and spillover regional demand as a result of power, land and regulatory constraints in more established markets and geopolitics.
Compared to North America, Moody’s expects a larger share of incremental data center capacity to be driven by traditional workloads – such as cloud migration and artificial intelligence (AI) inferencing – rather than frontier AI training.
This reflects the region’s large population base which is underserved by digital infrastructure and the relatively early stage of data center development.
Some markets may also see near-term AI-training demand focused on local language models, it added.
According to Moody’s Southeast Asia is evolving into a multi-hub data-center ecosystem, anchored by Singapore.
New subregional hubs are emerging, supported by available powered land to serve both incremental and existing demand once concentrated in Singapore.
It noted Singapore remains the region’s largest and most mature hub, with an estimated 1.0 GW of installed capacity, underpinned by its role as a regional connectivity gateway with extensive submarine cable links and a stable regulatory framework.
However, capacity expansion has become more constrained because of land and power limitations as well as sustainability requirements, prompting operators and
hyperscalers to adopt a hub-and-spoke model, where Singapore functions as a core interconnection and control node, while additional capacity is developed in surrounding markets.
Moody’s opined that this shift has particularly benefited Malaysia – especially Johor – which has positioned itself as a cost-efficient alternative to Singapore.
It is noted that in the past five years, Johor has transformed itself into one of the most dynamic and fastest growing data center hub in the region and is now a significant market within Southeast Asia.
Its growth has been supported by relatively abundant land, availability of power infrastructure and attractive investment incentives.
Moreover, the appeal of Johor to hyperscalers is further enhanced by its geographical proximity and the ability to leverage off Singapore’s robust international connection.
With around 897 MW of installed capacity and a significant development pipeline, it said Johor is increasingly integrated into Singapore-linked deployment strategies to
serve regional demand.
It added Johor has successfully capitalized on regional capacity constraints to position itself as a key destination for hyperscalers.
This is evidenced by significant investment commitments from Microsoft and Oracle, alongside the launch of new cloud regions in Johor over the past year, building on ByteDance’s earlier deployment in the state.
Meanwhile, Indonesia, led by Greater Jakarta and emerging nodes such as Batam, has also been growing rapidly with capacity exceeding 300 MW.
Its growth is driven primarily by its large domestic digital economy, data localization requirements and strong demand from both global hyperscalers and local technology players.
While both markets offer strong growth potential, developers have faced execution and infrastructure challenges, particularly around power and water availability, grid reliability and regulatory complexity, said Moody’s.
Beyond these core growth markets, the rating agency said Thailand and Vietnam are developing as mid-tier but accelerating data center markets, supported by rising enterprise demand, increasing cloud adoption and gradual localization of data infrastructure.
In Thailand, it highlighted Bangkok and the Eastern Economic Corridor are the primary hubs, benefiting from government support and improving infrastructure.
Vietnam’s Ho Chi Minh City and Hanoi are also emerging as key centers for enterprise and cloud deployments.
“Both markets are still in earlier stages of hyperscale penetration but are attracting increasing interest as part of regional diversification strategies,” said said Moody’s.
Meanwhile, the Philippines remains a smaller but steadily expanding market, with activity concentrated in Metro Manila and driven largely by enterprise demand, the business process outsourcing sector and gradual cloud adoption, said Moody’s.
Overall, while these emerging markets account for a smaller share of regional capacity, they represent the next phase of growth, contingent on improvements in power infrastructure, water availability, regulatory clarity and investment scale, it added.
According to the rating agency, hyperscalers are increasingly pursuing build-to-suit campuses and joint ventures with data center developers, particularly in India, Indonesia and Malaysia, to secure power and land, ensure faster scaling and improve cost certainty amid rising power and construction costs.
“In South and South East Asia, growth is further supported by Chinese hyperscalers expanding outside their home market to diversify operations and ecosystems,
“In response, Chinese data center operators have established subsidiary operations in emerging data center markets in Southeast Asia, particularly Malaysia, Indonesia and Thailand, to support multinational clients,” said Moody’s.
According to the rating agency, these emerging markets have become opportunistic expansion targets for Chinese data center operators amid growing geopolitical restrictions.
It noted favorable diplomatic ties and fewer external regulatory barriers allow Chinese operators to continue to scale their regional presence.
For example, GDS Holdings’ subsidiary, DayOne Data Centers Limited, has operations across Singapore, Malaysia, Indonesia, Thailand and Japan. Bridge Data Centres, a subsidiary of WinTriX DC Group, is also expanding rapidly in markets such as Malaysia and Thailand.
“The expansion of large, established Chinese data center operators into Southeast Asian markets is likely to intensify competition,” said Moody’s.
It noted that the Chinese companies typically benefit from scale, stronger financing and advanced technological expertise, enabling more competitive pricing and service levels than local providers.
Overall, Moody’s sees the pace and distribution of growth will increasingly depend on power availability, grid stability and execution capability.
Constraints in mature hubs are also pushing incremental investment toward emerging markets, while data localization rules and government incentives continue to underpin demand.