In 2025, AI development continues to increase the demand for infrastructure, data center investment in emerging markets such as Vietnam or India is expected to bring high profits from 9.5% - 10%...
Global data center market investment in 2024 has reached a new peak amid growing demand for artificial intelligence (AI).
10% PROFIT ON EMERGING MARKETS INVESTMENT
According to experts, most of the current supply of data centers in Asia is not yet equipped to host AI servers. Most of them are still data centers with a capacity of 10-40MW concentrated in developed markets. This is considered an investment attraction to upgrade and build new data centers for AI development with larger capacity in this market.
A report from MSCI Real Capital Analytics shows that the total volume of data center transactions in Asia in 2024 will reach USD 21.6 billion, nearly 10 times higher than in 2023. Leading in terms of investment capital are still developed markets such as Australia (39%), Japan (31%), Singapore (8%) and Hong Kong (8%).
Some notable investment transactions include KKR and Singapore Telecommunication (SingTel) investing $1.3 billion in ST Telemedia Global Data Centers project - a data center operator in Singapore.
Canada Pension Plan Investment Board (CPPIB), through a joint venture with Pacific Asset Management, has invested $686 million to develop a hyperscale data center in South Korea. CPPIB is also in a joint venture with Mitsui & Co (Japan) to build hyperscale facilities in Japan and is partnering with Keppel Ltd to develop other data centers in Asia and Europe.
In Southeast Asia, ASEAN economies have launched national AI strategies, with Singapore's NAIS 2.0 integrating technology into various sectors.
Thailand’s Board of Investment (BOI) has recently approved two large-scale digital infrastructure projects, one of which is TikTok’s 126.8 billion baht ($3.77 billion) data center, which is expected to be operational by 2026.
According to the BOI, the total number of applications for investment incentives in Thailand in 2024 jumped 35% to a 10-year record of 1.14 trillion baht ($33.85 billion), with the digital sector playing a leading role, especially large-scale foreign direct investment (FDI) projects in data centers and cloud services.
TikTok's move also reflects a trend that has been evident in recent years, with global tech giants pouring capital into Thailand's digital infrastructure.
Over the past year, Amazon Web Services and Google have both announced data center and cloud computing projects in the country, further cementing Thailand's position as a regional tech hub.
Meanwhile, Vietnam's strategy to 2030 clearly identifies AI as a fundamental technology field of the fourth industrial revolution, contributing significantly to creating a breakthrough in production capacity, improving national competitiveness and promoting sustainable economic growth.
Commenting on the data center market in Asian markets, Mr. Thomas Rooney, Deputy Director, Industrial Services Department, Savills Hanoi, said that the demand for data centers in Asia is currently very large, especially in group 1 markets such as Seoul, Tokyo, Hong Kong, Kuala Lumpur, Singapore or Bangkok.
“However, with high competition, these markets show a decrease in rental growth. Meanwhile, Group 2 markets such as Johor, Hanoi, Ho Chi Minh City or Bengaluru show their attractiveness when they are in a period of rental growth,” Mr. Thomas Rooney shared.
Faced with regional competition, investment returns in Tier 1 markets such as Seoul, Tokyo, Bangkok or Singapore have begun to decline. The average return for Tier 1 is around 5%. Meanwhile, data center investments in emerging markets such as Vietnam or India are expected to yield higher returns, ranging from 9.5% to 10%, thus attracting increasing interest from investors.
HIGH DEMAND, ELECTRICITY CHALLENGES
McKinsey research published in late 2024 found that global demand for data centers could increase by 19-22% between 2023 and 2030 to reach an annual demand of 117 to 219 gigawatts (GW) from current demand of just 60GW.
Last year, tech giants like Microsoft, Meta, Alphabet, and Amazon invested more than $200 billion, mostly in data centers and AI-related tool development. Investments in data centers for AI development are expected to continue to increase in 2025 amid reports of major investments.
For example, Microsoft announced a $128 billion investment plan to develop AI infrastructure and data centers globally, including a $3 billion deployment in India and $2.9 billion in Japan. Or US President Donald Trump announced Stargate - a data center infrastructure investment project to support AI development in the US with an initial investment of $100 billion and an expected investment of up to $500 billion.
As demand continues to grow, a key challenge is the need for adequate power infrastructure to support the massive demands of AI data centers. Power supply is becoming an issue in markets that have already attracted data centers. In fact, many data centers are finding that their current infrastructure is not up to the required capacity, leading to the possibility that at some point, the current power supply will not be sufficient to operate the system.
There are even concerns that data centers will put pressure on the electricity grid and climate targets, so some countries have put a freeze on new data center construction. Ireland, for example, has suspended the issuance of permits for data centers near Dublin until 2028. Ireland’s grid operators estimate that data centers will use about 28% of the country’s total electricity by 2030.
The continued growth of AI in 2025 is expected to continue to increase the demand for infrastructure, forcing the market to consider the location of data centers and ensure power supply in the context of increasing demand.
According to Savills forecasts, AI-enabled data centers require two to five times more electricity than conventional data centers. Therefore, there is an urgent need to change the design and operation methods as well as the location options and search for renewable energy solutions.
“Vietnam needs to take advantage of labor costs and young human resources to compete with other countries. At the same time, it is necessary to prioritize perfecting legal frameworks, facilitating investors, developing electricity infrastructure, ensuring grid infrastructure, cybersecurity, raising awareness of data and promoting data sharing. At the same time, it is also necessary to learn from successful models on building a sustainable AI ecosystem,” Mr. Thomas Rooney emphasized.
Looking ahead, Asia’s data center market is poised for sustained growth as data centers become the backbone of the digital economy, supporting the operations of various industries and enabling critical technologies. As AI continues to evolve, the need for sophisticated infrastructure will increase, creating opportunities for investment and innovation.
(Source: https://vneconomy.vn)