AI boom set to fuel data centre deals in region

Investments and M&A expected to flow in as demand for digital infrastructure grows

Global private equity investors and asset managers are readying for billions of dollars worth of mergers and acquisitions and investments linked to data centres in the Asia-Pacific region, as the artificial intelligence boom fuels demand for digital infrastructure.

The intense pace of deals in the world’s most populous region came as countries and companies responded to booming demand for AI, calling for more data capacity, industry executives said.

The Asia-Pacific region, including Japan, has led deal-making activities in the global data centre market this year, with M&A value totalling US$840.47 million, more than half of the global amount, LSEG data showed.

In 2023, the area’s data centre deals hit a record high of US$3.45 billion, according to LSEG. That tally is set to be surpassed this year with at least a couple of large transactions in the pipeline.

A number of financial sponsors, including global investment powerhouse Blackstone, were looking to acquire AirTrunk, which owns 11 hyperscale data centres in Australia and the rest of the region, sources close to the transaction said.

AirTrunk owners, Macquarie Group and Canada’s Public Sector Pension Investment Board (PSP), were aiming to value the business at up to A$15 billion (HK$77.5 billion), sources said, in what could be Asia’s largest data centre transaction this year.

AirTrunk, Blackstone, Macquarie and PSP declined to comment.

“The AI revolution is creating an unprecedented wall of demand for high quality data centre capacity,” said Garren Cronin, managing director of Cadence Advisory, which advised on Australian data centre operator NEXTDC’s US$861 million capital raising in April.

“The new capacity that needs to be built in Asia-Pacific in the next three to five years is simply mind-blowing. My expectation is that deal flow in the data centre space will intensify in 2024.”

Microsoft last week said it would invest US$2.2 billion over the next four years in Malaysia to expand its cloud and AI services across Asia.

The rise of data centre investments in Asia follows a similar trajectory to that seen in the United States and Europe with tech giants including Amazon, Microsoft, Alphabet and Meta Platforms rapidly expanding their AI capabilities.

Microsoft would open its first Asian data centre in Thailand, the company said last Wednesday, a day after announcing US$1.7 billion worth of investments in AI and cloud facilities in neighbouring Indonesia.

Other potential deals in Asia include Indonesia’s state-owned Telkom Indonesia’s sale of a stake in its data centre business worth US$1 billion and Japan’s NEC weighing a US$500 million data centre sale, according to news reports.

Telkom senior vice-president of investor relations Ahmad Reza yesterday said it was open to strategic partnerships to bring its data centre business arm NeutraDC new capabilities and new markets. “We have explored several potential partners, but we are still evaluating for the best one,” he said. “We expect to finish this process by the end of this year.”

NEC said it could not comment on market speculation.