MALAYSIA'S DATA CENTER POWER PLAY

THE COUNTRY ASPIRES TO PROVIDE THE BACKBONE OF THE GLOBAL AI BOOM. WILL THE BET PAY OFF?

- CLAY CHANDLER

THE JUNGLES OF JOHOR, the Malaysian state across the Johor Strait from Singapore, were first cleared in the 1840s by Chinese clans from Singapore seeking more space to grow black pepper. In the next century, under British rule, those pepper farms gave way to vast plantations of rubber and oil palm trees. On many of those same sites today, Johor is cultivating a new kind of cash crop: data centers meant to feed the world's voracious appetite for artificial intelligence.

Johor's data center boom, like the shift to growing pepper, is partly a function of scarcity in Singapore. The tiny city-state is Southeast Asia's digital hub. But it imports both water and power, and in 2019 imposed a moratorium on building data centers because the hulking facilities were guzzling water and consuming 7% of Singapore's electricity. Investors and operators of data centers flocked to neighboring Malaysia, where land is cheap, energy is abundant, and the government is eager to jump-start development of the nation's digital economy.

But Johor's rise as a data center powerhouse is also driven by the global scramble for computational power. Singapore rescinded its data center ban in January 2022, but the release of ChatGPT later that year triggered an explosion in global demand for AI infrastructure—and ignited a new investment frenzy in Malaysia. In 2023, Malaysia reaped more than $10 billion in investments for data centers, then tripled that in 2024, making the country the world’s hottest destination for data center investments in both years, according to property consultancy Knight Frank.

Johor is the epicenter of that construction surge. For the state, and for Malaysia, the big question is whether this flood of capital and expertise will carry their broader economies to a new era of high-tech growth—or whether other challenges, like shifts in global demand and constraints in local resources, will turn their data centers from cash cows to liabilities.