AI Boom Sparks Record Data Center Funding In Asia

The rapid advancements in artificial intelligence (AI) are fueling a surge in funding for data centers across Asia, igniting a wave of record-breaking loans and spurring future investment opportunities. In just one week, two prominent data center operators in Asia secured their largest-ever loans, with a significant portion directed toward expanding operations in Malaysia, which is emerging as a key hub for these critical facilities.

These deals highlight the growing appeal of the data center sector to a diverse array of investors, ranging from banks to real estate firms, as AI-driven demand intensifies. According to real estate services firm Cushman and Wakefield, the demand for data centers in Asia is expected to grow by approximately 32% annually through 2028, surpassing the United States’ forecasted growth of 18%. However, US tariff policies remain a potential wild card for the industry’s future.

“The surge in demand for data center capacity has piqued the interest of an ever-growing, diverse pool of capital investors and providers across the Asia Pacific,” said Yemi Tepe, a partner at law firm Morrison Foerster, who has worked on numerous technology-related financial transactions. While banks have traditionally been the primary source of funding for large-scale projects, the rise of private credit and infrastructure funds has broadened the financial landscape, Tepe noted.

Among the notable recent deals, Bain Capital-owned Bridge Data Centres secured a $2.8 billion loan facility to expand its operations in Malaysia. Meanwhile, DayOne, previously known as GDS International, launched a $3.4 billion-equivalent borrowing in the market.

Several more deals are in the pipeline across the Asia Pacific region. For instance, a Singapore-based arm of Australia’s Firmus Technologies is seeking a $120 million private loan, while India’s Yotta Data Services Pvt. is in discussions with private credit funds to raise approximately $500 million for its data center parks.

The growing geopolitical tensions between Beijing and Washington are also reshaping the landscape. With tech multinationals diversifying their operations beyond China, Southeast Asia is receiving a massive influx of investment, transforming local economies. Malaysia’s southern state of Johor, adjacent to Singapore, has been a major beneficiary of this investment boom, with over 30 data center projects completed or underway, and an additional 20 projects awaiting approval. Similarly, Thailand recently approved $5.9 billion in investment applications, including three projects aimed at expanding the sector.

However, despite the robust funding and expansion opportunities, the industry faces potential challenges stemming from rising US tariffs and the possibility of a broader trade war. Countries that supply the data center industry, particularly in Asia, as well as key components such as semiconductors, could be directly impacted. Furthermore, supply chain disruptions could delay projects.

“These geopolitical risks could lead to higher financing costs, lower investor confidence, and increased credit risk for financiers,” said Tepe. “As a result, investors may demand higher risk premiums or choose to divest from projects involving Chinese entities, which could slow the growth of the Southeast Asian data center market.”