The Outlook for Data Centers in Asia

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Goldman Sachs Research forecasts exceptionally robust growth for data centers in Asia. In China specifically, our analysts expect data center demand to grow at a 20% CAGR between 2025 and 2028. Apart from the Singapore-Indonesia-Malaysia triangle, the biggest potential markets for data centers are India, the Philippines, and Japan. Power supply is perhaps the chief constraint to growth in this sector, and our team believes that public-private partnerships are key to bridging this infrastructure gap. With the structural development of artificial intelligence (AI) and stepped-up AI investments globally, the data center industry is undergoing a massive transformation. Following the Asia Communacopia + Technology Conference, we asked Goldman Sachs analysts Ronald Keung and Timothy Zhao about what may come next for data centers in Asia, the critical power bottlenecks, and how AI is reshaping the industry's landscape. Below are their shared responses:

The outlook for data centers in Asia is exceptionally robust, characterized by a broad and steep growth curve. Traditional cloud workloads continue to grow alongside new GPU and AI-first demand, expanding the total market size rather than simply redistributing it. In China specifically, our team forecasts data center demand to grow at a 20% compound annual growth rate (CAGR) from 2025 to 2028, driven by structural developments in AI and stepped-up investments by hyperscalers and large language model (LLM) companies.

The SIJORI (Singapore–Johor–Riau Growth Triangle), established between Indonesia, Malaysia, and Singapore to strengthen economic links, has emerged as a strategic node in the region for the interconnected data center ecosystem over the past couple of years. Looking ahead, based on our recent Asia Communacopia + Technology Conference panel, our speakers see India, Japan, and the Philippines as key growth markets in the broader Asian region. The panelists expect India to grow rapidly, supported by favorable demographics, deep engineering talent, and its strategic proximity to the Middle East. Japan was flagged as a standout market, with government-backed initiatives driving aggressive expansion. Finally, they see the Philippines emerging as a strong growth market due to reduced red tape and scalable power availability.

Power remains a primary constraint affecting construction timelines and delivery capabilities across the region. Resolving grid infrastructure issues typically spans years to decades, making it a significant hurdle. Meanwhile, in China, domestic chip production is the near-term constraint, while overall power supply is much less of a constraint for data center development compared to the rest of Asia, as data centers have only accounted for around 2% of China’s power consumption of late. However, local green power supply and strict government requirements—such as mandating that green power account for over 80% of new computing infrastructure in major hubs—can act as short-term bottlenecks.

Public-private partnerships are essential to bridging the infrastructure gap. Governments should take the lead given that power is often a state-owned or heavily regulated utility, while private operators and hyperscalers are increasingly investing directly in power generation and renewables. Malaysia was highlighted at our conference as a prime example where government-utility collaboration continues to progress. Additionally, operators are adopting tailored approaches to balance power usage effectiveness (PUE) and water scarcity. For instance, some facilities in Mumbai are sourcing treated wastewater from nearby purification plants rather than using potable water, achieving highly efficient PUE levels.