Asia Pacific Datacenter Race Heats Up as AI Demand Pushes Capacity to New Highs

Hyperscalers and cloud giants are powering a new wave of datacenter expansion across Asia/Pacific excluding Japan (APEJ). The acceleration is unmistakable, driven by the region’s appetite for AI, digital services, and high-density compute infrastructure. Operators are accelerating buildouts to support the performance required for next-generation applications while navigating fast-rising energy demands.

IDC’s latest Asia/Pacific (Excluding Japan) Datacenter Deployment Model and Spend Forecast, 2025–2029, shows a market that is not only growing, but doing so at record speed.

Installed IT power capacity in APEJ is expected to reach 142,600 MW by 2029 at a 22% CAGR, a near-tripling in just five years. This aligns with wider industry forecasts projecting Asia–Pacific datacenter capacity to approach 94.4 GW by 2028 and potentially exceed 63,000 MW of additional capacity by 2030.

Together, these estimates reflect a region undergoing a structural shift, where demand for AI training, cloud migration, and 5G-enabled applications is redefining infrastructure expectations.

What’s Fueling the Boom

To start, hyperscalers are leading the charge. Their need for AI-ready infrastructure has pushed construction timelines to the limit, with multi-billion-dollar commitments flowing into mega-campuses designed to accommodate liquid cooling, GPU-dense racks, and power-hungry AI clusters.

As a result, colocation providers are scaling alongside them, driven by enterprises and governments accelerating cloud adoption and seeking flexible, hybrid-friendly environments. This dual engine of hyperscale growth and enterprise modernization is transforming the market faster than previous cloud cycles.

As demand widens, growth is no longer confined to well-established hubs. While Singapore, Tokyo, and Seoul remain critical, operators are increasingly turning to emerging markets across South and Southeast Asia. India, Malaysia, Indonesia, and Vietnam are becoming attractive build-to-suit destinations as land availability, renewable energy potential, and supportive policy frameworks make expansion more viable.

These new hubs help reduce latency for fast-growing user bases while easing pressure on power-constrained core markets. The shift toward secondary cities marks a notable evolution in the region’s infrastructure map, and it underscores how demand is no longer concentrated but distributed across diverse, rapidly digitizing economies.

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Sustainability, Efficiency, and Environmental Pressure

However, this expansion brings an unavoidable challenge. Rising energy consumption from AI-intensive workloads is forcing operators to rethink how data centers are designed and managed. What was once a secondary consideration has now become central to strategy.

Providers are integrating renewable energy purchasing, advanced cooling systems, and intelligent workload orchestration to curb power draw and reduce emissions. Industry studies warn that without aggressive adoption of energy-aware design, the next wave of AI-led datacenters could strain local grids and slow sustainability commitments.

Consequently, markets with reliable renewable resources and favorable climate conditions are gaining an edge. Cooler regions with stable power networks offer natural advantages for operators seeking both efficiency and growth headroom. Meanwhile, governments across APEJ are tightening data localization rules, which influence where datacenters can be built and how operators must balance regulatory compliance with sustainability goals.

The interplay between power availability, environmental regulation, and digital policy is shaping investment decisions as strongly as demand projections.

What It Means for Technology Suppliers, Businesses, and Governments

This momentum creates new expectations for technology suppliers. The race is no longer just about delivering hardware or compute capacity; it is about offering scalable, sustainable, and AI-optimized solutions that keep pace with next-generation workloads.

Suppliers who focus on high-density systems, liquid cooling technologies, renewable-ready power architectures, and hybrid-cloud integration will hold a clear advantage as operators raise their standards.

For enterprises, this infrastructure surge opens the door to faster digital transformation. With more capacity distributed across the region, businesses can tap low-latency services, comply with local data policies more easily, and run AI-driven applications with fewer performance bottlenecks. The maturing datacenter footprint gives organizations access to capabilities that were previously limited to a handful of metropolitan hubs.

Governments also play a pivotal role in the next phase of growth. As they balance sustainability targets with digital-economy ambitions, policy choices around land use, grid upgrades, renewable energy incentives, and compliance will determine which countries attract the largest share of investment. The markets that strike this balance effectively are likely to emerge as long-term regional leaders.

A Broader Look: Why This Boom Matters

All of these point to a broader shift across APEJ. The region is entering a digital infrastructure supercycle, and datacenters are becoming as foundational as ports, highways, or power grids. The next era of economic development will rely on compute capacity in the same way previous eras depended on physical infrastructure.

As AI, 5G, edge computing, and cloud services converge, the strain on existing systems will intensify. Studies modeling future AI adoption show that compute needs may expand exponentially, making today’s construction race not just timely but necessary.

The Bottom Line

The APEJ region is entering one of the most significant periods of datacenter investment in its history. What began as a push to support cloud growth has evolved into a full-scale transformation centered on AI readiness, massive density, and environmental responsibility. With capacity set to climb sharply over the next five years, the region is laying the groundwork for the next generation of digital services.

As Mikhail Jaura, senior research analyst for Cloud and Datacenter Services at IDC Asia/Pacific, notes, “The APEJ datacenter market is rapidly evolving with cloud and AI driving growth, but rising energy use and emissions demand urgent action. Technology suppliers must focus on sustainability and scalable, efficient infrastructure to stay competitive.” His message captures the reality of this moment: growth is inevitable, but responsible growth will define the long-term winners.

Taken together, these shifts point to a new digital era for Asia/Pacific excluding Japan, one shaped by scale, intelligence, and sustainability, and powered by infrastructure built to support the region’s next wave of innovation.