The jungles of Johor, the Malaysian state throughout the Johor Strait from Singapore, had been first cleared within the 1840s by Chinese language clans from Singapore in search of more room to develop black pepper. Within the subsequent century, underneath British rule, these pepper farms gave technique to huge plantations of rubber and oil palm timber. On a lot of those self same websites as we speak, Johor is cultivating a brand new form of money crop: knowledge facilities meant to feed the world’s voracious urge for food for synthetic intelligence.
Johor’s knowledge middle increase, just like the shift to rising pepper, is partly a operate of shortage in Singapore. The tiny city-state is Southeast Asia’s digital hub. However it imports each water and energy, and in 2019 imposed a moratorium on constructing knowledge facilities as a result of the hulking amenities had been guzzling water and consuming 7% of Singapore’s electrical energy. Buyers and operators of knowledge facilities flocked to neighboring Malaysia, the place land is reasonable, vitality is plentiful, and the federal government is raring to jump-start growth of the nation’s digital economic system.
However Johor’s rise as a knowledge middle powerhouse can be pushed by the worldwide scramble for computational energy. Singapore rescinded its knowledge middle ban in January 2022, however the launch of ChatGPT later that 12 months triggered an explosion in international demand for AI infrastructure—and ignited a brand new funding frenzy in Malaysia. In 2023, Malaysia reaped greater than $10 billion in investments for knowledge facilities, then tripled that in 2024, making the nation the world’s hottest vacation spot for knowledge middle investments in each years, in accordance with property consultancy Knight Frank.
Johor is the epicenter of that building surge. For the state, and for Malaysia, the large query is whether or not this flood of capital and experience will carry their broader economies to a brand new period of high-tech progress—or whether or not different challenges, like shifts in international demand and constraints in native sources, will flip their knowledge facilities from money cows to liabilities.
Johor hosts greater than 40 knowledge facilities which can be both operational or underneath building, in accordance with advisory agency Baxtel, up from a couple of dozen in 2022. Many extra are within the planning phases. Information middle capability, measured in how a lot energy the amenities can present, surged to over 1,500 megawatts final 12 months, up from 10 megawatts three years earlier, in accordance with knowledge middle market intelligence platform DC Byte.
If growth continues at its present breakneck tempo, Johor may overtake Northern Virginia because the world’s largest knowledge middle hall inside the subsequent 5 years.
“Johor is including knowledge middle capability at a velocity and scale I’ve not seen ever wherever else on the planet,” says Rangu Salgame, CEO of Princeton Digital Group, a Singapore-based knowledge middle operator. Princeton Digital, whose backers embody personal fairness large Warburg Pincus, final 12 months launched the primary part of a $1.5 billion, 150-megawatt knowledge middle campus in a large tech park 40 miles inland from the Singapore-Johor border crossing—and plans so as to add a second, 200-megawatt campus at a enterprise park a couple of miles up the street.
The parade of corporations piling in with multibillion-dollar funding bulletins in Johor additionally consists of international tech leaders like Nvidia, Microsoft, Alphabet, and Oracle, plus knowledge middle operators equivalent to California’s Equinix, Japan’s NTT Information, and China’s GDS Holdings.
“Three years in the past,” says Salgame, “for those who’d requested CEOs of the worldwide tech giants about Johor, they’d have by no means heard of it, a lot much less have the ability to discover it on a map. Now, everyone seems to be right here.”
It is no accident that the arrival of huge language fashions (LLMs) within the U.S. and China has sparked a knowledge middle bonanza in faraway Malaysia. Within the pre-ChatGPT period, for most of the companies dealt with by knowledge facilities, there was an infinite benefit to working from amenities bodily shut to finish customers. For capabilities like on-line gaming, inventory buying and selling, fraud detection, social media, or streaming movies, each millisecond counts. Corporations offering such companies pay large penalties for “latency”—sluggishness within the time it takes for knowledge to journey between a consumer’s system and the information middle and again.
In distinction, coaching LLMs isn’t interactive. As an alternative of sending requests and ready for real-time responses, it includes operating lengthy, steady computations on fastened datasets. The method can run for days or even weeks while not having fast back-and-forth communication. When latency isn’t a priority, AI corporations can as an alternative prioritize effectivity—low-cost and plentiful energy and land—and find knowledge facilities hundreds of miles from the place the fashions are designed or meant for use. Meaning Malaysia’s AI knowledge facilities can compete not solely with these in Singapore or different Southeast Asian neighbors, but additionally with related amenities worldwide.
Malaysian Prime Minister Anwar Ibrahim has welcomed the information middle increase and is rolling out strategic initiatives, together with tax breaks and streamlined approval procedures, to place the nation as a worldwide AI hub. A crucial a part of that push is the Inexperienced Lane Pathway, a 2023 initiative launched by Tenaga Nasional Berhad, Malaysia’s main electrical energy utility, that goals to cut back the time required to attach knowledge facilities to the ability grid to 12 months, down from greater than three years prior.
There are indicators the information middle increase is straining Malaysia’s sources—for among the identical causes the amenities had been briefly banned in Singapore. Malaysia, like Singapore, is likely one of the most water pressured international locations on the planet. Malaysia’s Nationwide Water Companies Fee has warned that the nation may face widespread water shortages within the subsequent 5 years owing to local weather change and growing older infrastructure—even with out factoring in elevated demand from knowledge facilities.
Energy, too, is a matter. A medium-size knowledge middle might need a capability of 40 to 50 megawatts, sufficient to devour as a lot electrical energy in a 12 months as about 125,000 houses, relying on utilization. Massive hyperscale AI processing facilities can require as a lot as 500 megawatts repeatedly, consuming extra electrical energy yearly than the roughly 250,000 households in Johor’s largest metropolis, Johor Bahru.
Malaysia’s place on the equator implies that its knowledge facilities additionally require way more vitality to chill than amenities in northern international locations with colder climates.
At a current investor convention, Johor Bahru Mayor Mohd Noorazam Osman acknowledged issues about water and energy shortages. “Individuals are too overestimated about knowledge facilities these days,” he mentioned. “The difficulty in Johor is we wouldn’t have sufficient water and energy. I imagine that whereas selling investments is necessary, it mustn’t come on the expense of native and home wants of the individuals.”
The Malaysian authorities says it expects knowledge facilities working within the nation to pay a premium for water and energy; early indications recommend tech corporations and operators are prepared to take action. Authorities final 12 months rejected the functions of a handful of knowledge middle initiatives for failure to adjust to effectivity and sustainability requirements.
The fast enhance in energy demand from knowledge facilities may show a boon if it accelerates Malaysia’s transition to renewable vitality. In 2020, solely about 4% of Malaysia’s energy got here from renewable sources. That proportion is anticipated to rise above 30% this 12 months, in accordance with the Malaysian Funding Growth Authority, and the federal government has vowed to extend the share of renewable vitality in complete technology capability to 70% by 2050.
In Johor, authorities are considering large. Princeton Digital’s first knowledge middle campus is situated in Sedenak Tech Park (STeP), a 700-acre digital hub owned by the property arm of JCorp, a state-owned conglomerate, on a web site that was as soon as a part of a sprawling palm oil plantation. Along with the Princeton hub, STeP features a 300-megawatt hyperscale knowledge middle campus being constructed by Amsterdam’s Yondr Group, and a 3rd, underneath growth by Japan’s Mitsui & Co., that may embody an on-site photo voltaic farm.
STeP, already Malaysia’s largest knowledge middle advanced, is about to get greater. JCorp is growing a second part, STeP 2, that may add one other 640 acres to the park, and has plans for a 7,000-acre township that may embody R&D amenities, residential areas, and tradition and rec facilities. JCorp additionally has engaged Zaha Hadid Architects to design a 500-acre innovation hub known as Discovery Metropolis that may combine digital applied sciences and sustainable residing.
The proliferation of such initiatives is reworking Johor, Malaysia’s southernmost state. Johor and Singapore are linked by two land crossings, Woodlands and Tuas Hyperlink, which can be among the many busiest and most congested border crossings on the planet. The Singapore facet is densely populated and punctiliously organized, with tolls and customs digitized. The Johor facet is bustling and chaotic, with way more bikes, small vehicles, and buses.
“Johor is including knowledge middle capability at a velocity and scale I’ve not seen ever wherever else.”
Rangu Salgame, CEO of Princeton Digital Group
In January, Johor signed a “particular financial zone” settlement with Singapore to promote cross-border cooperation between the 2 economies. The motorbike-loving billionaire sultan of Johor, at present Malaysia’s king underneath the nation’s rotating monarchy system, is championing the trouble to convey his state and Singapore nearer collectively. The settlement consists of tax breaks, permits smoother cross-border commerce, and makes it simpler for expert labor to maneuver forwards and backwards throughout the border.
It’s unclear whether or not knowledge facilities will generate extra and higher jobs for Johor. Most knowledge facilities present about 30 to 50 everlasting jobs. Bigger amenities may create as many as 200. However on their very own, knowledge facilities appear unlikely to considerably enhance total wealth in Johor, the place the GDP per capita is about $10,000 in contrast with practically $85,000 in Singapore. Neither is it clear that Malaysia can use the event of knowledge facilities to draw different tech industries equivalent to chip manufacturing.
The bigger threat is a worldwide knowledge middle bubble. The so-called DeepSeek Shock (China’s breakthrough AI mannequin that rattled Wall Road) may cut back the dimensions and demand for knowledge facilities in every single place if an overhaul of AI fashions to match DeepSeek’s low-cost strategy reduces demand for cutting-edge chips, expanded energy vegetation, and large-scale knowledge facilities.
Salgame, for his half, says he’s “not in the slightest degree nervous” about flagging demand for computational energy from the information facilities Princeton Digital is constructing in Johor. Cheaper, extra environment friendly AI fashions will solely speed up the world’s use of AI—and the necessity for low-cost AI coaching facilities in locations like Johor. “That is solely the start,” he says.
This text seems within the April/Could 2025: Asia problem of Fortune with the headline “Malaysia’s knowledge middle energy play.”
This story was initially featured on Fortune.com
