Malaysia’s Data Centre Sector Eyes Triple Capacity By 2030

By Lara Kramer  •  11 Sep 2026 in News

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Malaysia’s data centre industry is moving towards a more sustainable growth phase after several years of rapid expansion, with the country’s total capacity expected to more than triple by 2030, reports state.

S&P Global Ratings associate director of corporate ratings Spencer Ng said the expansion could create more than US$20 billion in funding needs for power infrastructure, data centre shells, equipment, and chips.

“The scale of growth is immense for the next few years,” Ng said during S&P Global Ratings’ Malaysia Credit Outlook: Geopolitics, Data Centres, And The Future Of Credit webinar.

He said Malaysia continues to hold a strong position in the regional data centre market despite rising costs, helped by its proximity to Singapore, extensive subsea cable connectivity, and improvements to power and water infrastructure.

Johor remains at the centre of the country’s data centre expansion, accounting for around 80 per cent of Malaysia’s existing capacity.

Ng also pointed to government measures aimed at making the sector more efficient, including tighter approval requirements that favour artificial intelligence-ready and resource-efficient facilities, alongside revised electricity and water tariffs.

Policies such as greening pathways and penalties for underutilising electricity could also help curb speculative demand and ensure grid connections are prioritised for projects that are ready to move ahead.

According to Ng, greening pathways have already helped shorten grid connection timelines by as much as 12 months. He said this compares favourably with markets such as the United States, the United Kingdom, and major Asia-Pacific data centre hubs, where connections can take between three and 10 years.

The rapid expansion is also expected to reshape how data centre projects are financed.

Ng said banks could eventually reach their internal limits for lending to the sector, creating more room for alternative funding sources such as project finance and private credit.

Project finance could help developers manage construction risks, while private credit offers greater flexibility in financing structures. Ng noted that the United States, which he described as a benchmark for data centre financing, has already seen an increase in data centre project finance transactions.

Structured finance could provide another source of funding, although Ng said the option remains relatively underdeveloped in Malaysia. Investors may need time to become familiar with the structure, while its ability to absorb significant construction risk remains limited.

As a result, he expects structured finance activity to pick up more significantly once a larger number of Malaysian data centres have reached completion.

Meanwhile, S&P Global Ratings director of financial institution ratings Nikita Anand said Malaysian banks currently have relatively limited exposure to data centre financing, at around 1% of their total loans.

Banks are taking a cautious approach to increasing their exposure, although Anand said constraints could emerge over time, particularly for smaller lenders facing large financing requirements and regulatory limits on individual borrowers.

She said banks typically operate below their internal sector concentration limits, with no single sector generally accounting for more than 6% to 7% of total loans, or approximately US$30 billion.

Lenders are also keeping single-borrower exposure well below the 25% regulatory ceiling, generally limiting it to around 10% to 20% because of the size of data centre deals and sustainability considerations.

From an economic perspective, S&P Global Ratings senior economist for Asia-Pacific Vishrut Rana said data centre investment is giving Malaysia’s economy a short-term lift through construction activity, capital spending, equipment purchases, and increased demand for utilities.

However, the longer-term economic benefits are less straightforward. Rana noted that data centres are relatively low value-added activities, rely heavily on imported equipment, and tend to generate fewer jobs compared with other forms of investment.

The sector may therefore remain an important source of investment and growth for Malaysia, but its broader economic contribution will depend on how much value the country can capture beyond simply hosting the infrastructure.

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