APAC data centers to see strong growth and benefit from AI uplift: BofA

Asia-Pacific (APAC) data centers are poised for significant growth over the next five to six years, driven by a surge in demand from hyperscalers, enterprise migration to third-party data centers, and the adoption of generative AI (Gen-AI), according to Bank of America (BofA) analysts.

BofA cites data from Structure Research, which projects that APAC data center colocation capacity will grow at a compound annual growth rate (CAGR) of 14% over the next five years, adding nearly 2GW of new capacity annually.

Analysts note that this is a substantial increase from the ~1GW of new capacity added per year between 2018 and 2023.

"Strong growth in hyperscaler demand (20%+ CAGR), enterprise migration from on-premise to third-party DCs/ cloud solutions and adoption of Gen-AI is seen driving the sector growth," writes BofA.

While primary markets such as Tokyo, Singapore, Sydney, and Hong Kong currently account for about 50% of APAC's data center capacity, BofA notes that these regions face constraints due to limited land and power resources, as well as high development costs.

As a result, demand is said to be shifting to secondary markets like Johor, Mumbai, and Jakarta, which are expected to experience a 3-8x growth in capacity in the coming years.

"Data sovereignty laws mandating data to be store locally (in VN, IN, ID, etc.) will also drive growth in local DC demand," adds the bank.

The deployment of AI models is also set to significantly impact APAC data center demand. BofA notes that "adoption of Gen-AI models is expected to drive as much as one-third of the incremental data center demand in the next five years," particularly as APAC companies develop multilingual and domain-specific AI models, driving further data center requirements.

Source: Investing.com