Booming GenAI demand to propel doubling of Asia-Pacific data centre capacity by 2028
Data centre capacity in Asia-Pacific (APAC), the fastest-growing market globally, is set to double in the next five years, driven by increasing adoption of artificial intelligence (AI) and cloud computing, according to analysts.
The rapid growth of data centres alongside rising demand for electricity and water could expose the region to carbon transition risks, they added.
Data centre capacity in APAC is expected to grow at a compound annual average rate of almost 20 per cent through 2028 to about 24,800 megawatts (MW) - more than double the current capacity of 10,500MW, Moody's Ratings said in a report last week.
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The region is expected to constitute about 30 per cent of global capacity expansion over the next five years, with more than US$564 billion of investment, the rating agency said.
The booming investments into developing generative AI software in APAC will drive the growth of the region's data centre market, according to S&P Global.
"North America is the largest market when it comes to generative AI, driving about 63 per cent of global revenues," Melissa Incera, research analyst for data, AI, and analytics at S&P Global Market Intelligence, said during a webinar last week.
An outside view of Meta's newly completed data centre in Eagle Mountain, Utah. The data centre is a complex of five large buildings each over four football fields long and totalling 2.4 million sq ft. Photo: AFP alt=An outside view of Meta's newly completed data centre in Eagle Mountain, Utah. The data centre is a complex of five large buildings each over four football fields long and totalling 2.4 million sq ft. Photo: AFP>
Because of the aggressive investments in other regions to match growing local demand, S&P Global expects revenue from North America to shrink and rise in other parts of the world, especially APAC, she added.
S&P Global estimates APAC will have the most substantial market share gains in the generative AI software sector by 2028, with its share of global revenues growing from the current 14 per cent to 20 per cent in five years, while North America's share will shrink from 63 per cent to 55 per cent.
There is a strong pipeline of more than 4,400MW of data centre capacity under construction in key APAC markets, about 75 per cent of which is in China, Japan, Australia and India, according to Moody's. Most of the new capacity should be completed before 2025.
However, data centre expansion in APAC could introduce greater exposure to carbon transition and water management risks for operators. as well as investors, according to Nidhi Dhruv, vice-president and senior credit officer at Moody's.
"Data centres are already being primarily served by non-sustainable power sources and the rapid increase in demand is likely to outpace the development of low-carbon energy," Dhruv said in a report last week.
"This could make it hard for some tech giant tenants and data centre developers to stick to their net zero targets while meeting growing demand."
According to the International Energy Agency, the increasing demand and adoption of generative AI, such as OpenAI's ChatGPT, are expected to drive global data centre electricity consumption to more than double from 2022 to 2026, as vast amounts of power are required to keep the servers running and cooling them.
However, most countries in APAC primarily rely on fossil fuels to generate power. China, the biggest data centre market in APAC with 3,956MW of capacity, relies heavily on coal power. The country generated nearly two-thirds of its electricity from coal last year.
Rising water stress in some Asian markets could also lead to service interruption, as water is still essential for cooling and maintaining humidity in data centres.
Hong Kong-based non-profit China Water Risk said in a report this year that China's data centres consume around 1.3 billion cubic metres of water annually, which is enough for 26 million people. As more data centres are built in China, that figure could reach more than 3 billion cubic metres by 2030, more than the water demand in South Korea,
To meet climate commitments, APAC governments have started regulating the environmental impact of data centres. Last week, China unveiled an action plan on the sustainable development of data centres, setting targets to improve energy efficiency and use renewable energy.
Data centre developers and tenants, particularly in markets with net-zero targets, are encouraged to sign long-term corporate power purchase agreements to supply renewable power and curb their exposure to carbon transition risk, Moody's said.
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