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 looking for more room to develop black pepper. Within the subsequent century, underneath British rule, these pepper farms gave option to huge plantations of rubber and oil palm bushes. On lots of those self same websites at this time, 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 growth, just like the shift to rising pepper, is partly a perform 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 affordable, vitality is plentiful, and the federal government is keen to jump-start improvement of the nation’s digital financial system.
However Johor’s rise as an information heart powerhouse can also 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 Singapore rescinded its knowledge heart ban in January 2022, however the launch of ChatGPT later that 12 months triggered an explosion in world demand for AI infrastructure—and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 keeping 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 world demand and constraints in native assets, will flip their knowledge facilities from money cows to liabilities.
Johor hosts greater than 40 knowledge facilities which are both operational or underneath building, in keeping with advisory agency Baxtel, up from a few dozen in 2022. Many extra are within the planning levels. Knowledge heart 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 keeping with knowledge heart market intelligence platform DC Byte.
If enlargement 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 including knowledge heart capability at a velocity and scale I’ve not seen ever anyplace else on the earth,” says Rangu Salgame, CEO of Princeton Digital Group, a Singapore-based knowledge heart operator. Princeton Digital, whose backers embrace personal fairness large Warburg Pincus, final 12 months launched the primary part of a $1.5 billion, 150-megawatt knowledge heart 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 world tech leaders like Nvidia, Microsoft, Alphabet, and Oracle, plus knowledge heart operators corresponding to California’s Equinix, Japan’s NTT Knowledge, and China’s GDS Holdings.
“Three years in the past,” says Salgame, “should you’d requested CEOs of the worldwide tech giants about Johor, they’d have by no means heard of it, a lot much less be capable of 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 an information heart bonanza in faraway Malaysia. Within the pre-ChatGPT period, for lots of the companies dealt with by knowledge facilities, there was an unlimited benefit to working from amenities 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 companies pay large penalties for “latency”—sluggishness within the time it takes for knowledge to journey between a consumer’s machine and the info heart and again.
In distinction, coaching LLMs isn’t interactive. As a substitute of sending requests and ready for real-time responses, it includes operating lengthy, steady computations on mounted datasets. The method can run for days or perhaps weeks with no need speedy 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 in addition with related amenities worldwide.
Malaysian Prime Minister Anwar Ibrahim has welcomed the info heart growth and is rolling out strategic initiatives, together with tax breaks and streamlined approval procedures, to place the nation as a world AI hub. A essential 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 facility grid to 12 months, down from greater than three years prior.
There are indicators the info heart growth is straining Malaysia’s assets—for a few of the similar causes the amenities had been quickly banned in Singapore. Malaysia, like Singapore, is likely one of the most water careworn nations on the earth. 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 may 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 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 amenities in northern nations with colder climates.
At a current investor convention, Johor Bahru Mayor Mohd Noorazam Osman acknowledged considerations about water and energy shortages. “Individuals are too overestimated about knowledge facilities these days,” he stated. “The problem in Johor is we shouldn’t have sufficient water and energy. I consider that whereas selling investments is essential, it shouldn’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 counsel tech corporations and operators are keen to take action. Authorities final 12 months rejected the functions of a handful of knowledge heart initiatives for failure to adjust to effectivity and sustainability requirements.
The speedy improve 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 share is anticipated to rise above 30% this 12 months, in keeping with the Malaysian Funding Improvement 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 massive. 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 may embrace an on-site photo voltaic farm.
STeP, already Malaysia’s largest knowledge heart complicated, is about to get larger. JCorp is creating 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 embrace R&D amenities, residential areas, and tradition and rec facilities. JCorp additionally has engaged Zaha Hadid Architects to design a 500-acre innovation hub referred to as Discovery Metropolis that may combine digital applied sciences and sustainable residing.
The proliferation of such initiatives is remodeling Johor, Malaysia’s southernmost state. Johor and Singapore are linked by two land crossings, Woodlands and Tuas Hyperlink, which are among the many busiest and most congested border crossings on the earth. 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 including knowledge heart capability at a velocity and scale I’ve not seen ever anyplace 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 the moment 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, allows 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 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 practically $85,000 in Singapore. Neither is it clear that Malaysia can use the event of knowledge facilities to draw different tech industries corresponding to chip manufacturing.
The bigger danger is a world knowledge heart bubble. The so-called DeepSeek Shock (China’s breakthrough AI mannequin that rattled Wall Road) may scale back the dimensions and demand for knowledge facilities all over the place if an overhaul of AI fashions to match DeepSeek’s low-cost method reduces demand for cutting-edge chips, expanded energy vegetation, and large-scale knowledge facilities.
Salgame, for his half, says he’s “not in the least apprehensive” about flagging demand for computational energy from the info 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 subject of Fortune with the headline “Malaysia’s knowledge heart energy play.”
This story was initially featured on Fortune.com
