Southeast Asia is becoming an increasingly important hub for artificial intelligence (AI) infrastructure, and Malaysia is well placed to capture this opportunity.
Data centres are not something that most people ever think about; they simply expect their digital lives to work. But keeping apps running, payments flowing, deliveries moving and public services operating requires a scale and reliability of digital infrastructure to match.
As digital demand and AI models advance, we need increasingly more storage and processing capability. Just as railways and telegraph cables propelled earlier economic transformations, more data centres can be the engine behind a contemporary uplift. As well as enabling tech adoption, they are essential to e-commerce and digital banking across the region.
In 2026, cloud companies are expected to spend around US$700 billion on new data centres and other infrastructure. Much of that demand will be in Malaysia’s backyard. Neighbouring Singapore has big AI ambitions but limited space to host the physical infrastructure needed. Looking across the region, digital growth in ASEAN will require increased cloud capacity.
The Malaysian government has made a serious bet on AI with aspirations for the country to become a globally competitive “AI nation” by 2030. For years, policies under the Malaysia Digital Economy Blueprint (MyDigital) have nudged the country towards regional leadership as a digitally enabled society and global technology hub.
That policy push and other advantages mean the country has the opportunity to play host to the data centre boom. It has available land for new infrastructure and existing sites that are scalable. Power costs are competitive and there’s a growing pipeline of renewable energy (RE) projects in planning or construction. There is also strong existing digital connectivity, particularly in the Johor-Singapore Special Economic Zone and in the Klang Valley around Kuala Lumpur.
However, the biggest threat isn’t capacity, it’s perception as data centres are often viewed not as critical digital infrastructure, but as energy intensive real estate. Energy is clearly an important consideration, but it is vital to separate the need for growth-enabling tech from the way it is powered.
Even before the Iran conflict, cloud and AI companies were underwriting clean power at scale. In 2025, these companies signed nearly half of all global corporate clean energy contracts, driving new wind, solar and battery storage.
But the disruption to global fossil fuel supplies caused by the war is prompting a step change. Malaysia and others in the region are doubling down on low-carbon energy in line with net-zero plans. The government recognises that renewables and battery storage are now a strategic national priority, and the market is already responding. Chinese solar panel exports to Malaysia doubled in the first full month of the war, for example.
As these trends accelerate alongside more water-efficient designs, sustainable development of cloud infrastructure can be a differentiating feature for Malaysia. If data centres are to be treated as essential infrastructure, the sector must show up accordingly as a reliable, coordinated partner to governments, utilities and communities. Responsible use of both power and water will be critical to maintaining public support as the sector grows.
In this regional race between countries to increase cloud capacity, speed is of the essence. More can be done to get projects green-lit and construction started. Coordination between federal and state authorities can be sped up and approvals across agencies streamlined. Projects would benefit from clearer grid connection timelines by the national grid operator Tenaga Nasional Bhd, as well as corporate power purchase agreements or green tariffs to enable reliable, long-term access to renewable power.
But investors also need policy certainty. Cloud infrastructure is planned and financed over decades, with investment decisions based on confidence that regulatory policies and processes will remain stable and transparent. A clear, long-term policy framework for digital infrastructure, clean energy procurement and grid expansion will give global investors the confidence to commit capital at scale. Consistent implementation and timely decisions across federal and state governments, predictable approval processes and market-based policies that enable private investment in RE and supporting infrastructure will be just as important as Malaysia’s natural advantages.
Malaysia has consistently positioned itself as a welcoming destination for high-quality digital infrastructure investment, including cloud services, artificial intelligence, enterprise digitalisation and regional connectivity. Data centres are a critical backbone for Malaysia’s AI, cloud and digital economy ambitions. A report by KPMG commissioned by the Asia Pacific Data Centre Association (2025) that was presented to the Data Centre Taskforce showed that Malaysia has 54 operational data centres with 505MW of live IT capacity in 2024, with baseline capacity projected to reach approximately 3.6GW by 2030. Under the same baseline scenario, data centres in Malaysia could support approximately US$34.2 billion in total economic output across construction and operations by 2030, alongside approximately 30,900 jobs, including around 4,300 high-value knowledge jobs.
Expanding Malaysia’s cloud capacity will also create high-value economic opportunities. The build-out will tap into the country’s talent pipeline in engineering, construction and digital infrastructure. This will stimulate partnerships with local universities and technical institutes and create a hub effect for further digital growth and innovation. That means high-skill jobs and local economic benefits that ripple through the wider economy.
But beyond economic effects, building digital infrastructure at home has other benefits. Citizens are increasingly concerned about what can be done with their data and which laws govern it. Digital investments and infrastructure sited within Malaysia will assuage those sovereignty concerns, and with the conducive policy framework the country can position itself as a trusted regional hub for data security.
Malaysia is well placed to capture the next wave of digital infrastructure investment. But doing so will require alignment across policy, power and delivery, and a shared commitment from both government and industry to move at pace. As Malaysia continues its efforts to strengthen its position as a competitive, sustainable and well-governed digital hub in the region, it must also work collaboratively with appropriate transition and consultation, as this will materially affect investment certainty, project bankability and Malaysia’s competitiveness as a regional destination for cloud, AI and digital infrastructure investment.
In the race to power AI, infrastructure winners will define the next decade of growth in Southeast Asia. Malaysia still has a chance to lead, but not much time to hesitate.
The above commentary is contributed by Pei Jet Lim, Vice President & Country Head of AirTrunk Malaysia
