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 strategy to huge plantations of rubber and oil palm timber. On lots of those self same websites immediately, Johor is cultivating a brand new sort of money crop: knowledge facilities meant to feed the world’s voracious urge for food for synthetic intelligence.
Johor’s knowledge heart 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. But it surely imports each water and energy, and in 2019 imposed a moratorium on constructing knowledge facilities as a result of the hulking services had been guzzling water and consuming 7% of Singapore’s electrical energy. Buyers and operators of information facilities flocked to neighboring Malaysia, the place land is reasonable, vitality is considerable, and the federal government is keen to jump-start improvement of the nation’s digital economic system.
However Johor’s rise as a knowledge heart powerhouse can be pushed by the worldwide scramble for computational energy. Singapore rescinded its knowledge heart ban in January 2022, however the launch of ChatGPT later that yr triggered an explosion in international demand for AI infrastructure—and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 heart investments in each years, in response to 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 assets, 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 response to advisory agency Baxtel, up from a couple of dozen in 2022. Many extra are within the planning levels. Knowledge heart capability, measured in how a lot energy the services can present, surged to over 1,500 megawatts final yr, up from 10 megawatts three years earlier, in response to knowledge heart market intelligence platform DC Byte.
If growth continues at its present breakneck tempo, Johor may overtake Northern Virginia because the world’s largest knowledge heart hall throughout the subsequent 5 years.
“Johor is adding data center capacity at a speed and scale I’ve not seen ever anywhere else in the world,” says Rangu Salgame, CEO of Princeton Digital Group, a Singapore-based knowledge heart operator. Princeton Digital, whose backers embrace non-public fairness large Warburg Pincus, final yr launched the primary section of a $1.5 billion, 150-megawatt knowledge heart campus in an enormous 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 number of miles up the highway.
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 heart operators akin to California’s Equinix, Japan’s NTT Knowledge, and China’s GDS Holdings.
“Three years ago,” says Salgame, “if you’d asked CEOs of the global tech giants about Johor, they’d have never heard of it, much less be able to find it on a map. Now, everyone is here.”
It is no accident that the appearance of huge language fashions (LLMs) within the U.S. and China has sparked a knowledge heart bonanza in faraway Malaysia. Within the pre-ChatGPT period, for lots of the providers dealt with by knowledge facilities, there was an infinite benefit to working from services bodily shut to finish customers. For features like on-line gaming, inventory buying and selling, fraud detection, social media, or streaming movies, each millisecond counts. Firms offering such providers pay big penalties for “latency”—sluggishness within the time it takes for knowledge to journey between a person’s gadget and the information heart and again.
In distinction, coaching LLMs isn’t interactive. As an alternative of sending requests and ready for real-time responses, it includes working lengthy, steady computations on mounted datasets. The method can run for days or perhaps weeks with no need fast back-and-forth communication. When latency isn’t a priority, AI corporations can as an alternative prioritize effectivity—low-cost and considerable energy and land—and find knowledge facilities 1000’s 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 in addition with related services worldwide.
Malaysian Prime Minister Anwar Ibrahim has welcomed the information heart 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 major 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 heart increase is straining Malaysia’s assets—for among the identical causes the services had been briefly banned in Singapore. Malaysia, like Singapore, is among the most water careworn nations on the planet. Malaysia’s Nationwide Water Providers 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 heart might need a capability of 40 to 50 megawatts, sufficient to eat as a lot electrical energy in a yr as about 125,000 houses, relying on utilization. Giant hyperscale AI processing facilities can require as a lot as 500 megawatts constantly, 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 services in northern nations with colder climates.
At a latest investor convention, Johor Bahru Mayor Mohd Noorazam Osman acknowledged issues about water and energy shortages. “People are too hyped up about data centers nowadays,” he mentioned. “The issue in Johor is we do not have enough water and power. I believe that while promoting investments is important, it should not come at the expense of local and domestic needs of the people.”
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 yr rejected the functions of a handful of information heart 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 yr, in response to the Malaysian Funding Improvement Authority, and the federal government has vowed to extend the share of renewable vitality in whole technology capability to 70% by 2050.
In Johor, authorities are pondering large. Princeton Digital’s first knowledge heart campus is positioned in Sedenak Tech Park (STeP), a 700-acre digital hub owned by the property arm of JCorp, a state-owned conglomerate, on a website 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 heart campus being constructed by Amsterdam’s Yondr Group, and a 3rd, underneath improvement by Japan’s Mitsui & Co., that can embrace an on-site photo voltaic farm.
STeP, already Malaysia’s largest knowledge heart complicated, is about to get larger. JCorp is growing a second section, STeP 2, that can add one other 640 acres to the park, and has plans for a 7,000-acre township that can embrace R&D services, 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 can combine digital applied sciences and sustainable residing.
The proliferation of such initiatives is reworking Johor, Malaysia’s southernmost state. Johor and Singapore are related 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 thoroughly organized, with tolls and customs digitized. The Johor facet is bustling and chaotic, with way more bikes, small vehicles, and buses.
“Johor is adding data center capacity at a speed and scale I’ve not seen ever anywhere else.”
Rangu Salgame, CEO of Princeton Digital Group
In January, Johor signed a “special economic 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 hassle 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 backwards and forwards 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 services would possibly create as many as 200. However on their very own, knowledge facilities appear unlikely to considerably increase general wealth in Johor, the place the GDP per capita is about $10,000 in contrast with almost $85,000 in Singapore. Neither is it clear that Malaysia can use the event of information facilities to draw different tech industries akin to chip manufacturing.
The bigger danger is a worldwide knowledge heart bubble. The so-called DeepSeek Shock (China’s breakthrough AI mannequin that rattled Wall Road) may cut back the size and demand for knowledge facilities in all places if an overhaul of AI fashions to match DeepSeek’s low-cost method reduces demand for cutting-edge chips, expanded energy crops, and large-scale knowledge facilities.
Salgame, for his half, says he’s “not the least bit worried” 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. “This is only the beginning,” he says.
This text seems within the April/Could 2025: Asia problem of Fortune with the headline “Malaysia’s data center power play.”
This story was initially featured on Fortune.com
