Booming Demand for GenAI to Drive Doubling of Asia-Pacific Data Centre Capacity by 2028
APAC data centre capacity set to double by 2028, driven by GenAI demand. Moody’s forecasts a 20% annual growth rate in data centre capacity in APAC. S&P Global predicts significant market share gains for APAC in generative AI software by 2028.
Experts warn that the region may face carbon transition concerns as data centres expand rapidly and demand for power and water rises. Moody's Ratings predicts that APAC's data centre capacity would increase at an annual average rate of about 20% by 2028, reaching around 24,800 megawatts (MW), more than double the current capacity of 10,500MW.
According to Moody’s, the region is expected to contribute about 30% to global capacity expansion over the next five years, attracting over US$564 billion in investments. The burgeoning investments in developing generative AI software in APAC are set to propel the growth of the region’s data centre market, as highlighted by S&P Global.
Melissa Incera, a research analyst at S&P Global, noted that North America dominates the generative AI business, accounting for around 63% of global revenues. However, due to significant expenditures in other countries to fulfil escalating local demands, S&P Global predicts a reduction in North American revenue and an increase in APAC and other parts of the world.
By 2028, S&P worldwide predicts that APAC will have a considerable market share rise in the generative AI software industry, with its worldwide revenue share increasing from 14% to 20%, while North America's share is predicted to fall from 63% to 55%.
Moody’s reports a robust pipeline of over 4,400MW of data centre capacity under construction in key APAC markets, with about 75% concentrated in China, Japan, Australia, and India. The majority of this new capacity is projected to be operational before 2025.
However, Nidhi Dhruv, vice-president and senior credit officer at Moody's, believes that the construction of data centres in APAC may increase operators' and investors' exposure to carbon transition and water management concerns. Dhruv expressed worries about the sustainability of electricity supplies, as well as the possible problems of attaining net-zero standards in the face of increasing demand.
In response to rising demand for generative AI, such as OpenAI's ChatGPT, the International Energy Agency expects a more than twofold increase in worldwide data centre electricity consumption between 2022 and 2026. This increase in power consumption is caused by the need to maintain server operations and cooling systems.
Most APAC countries rely significantly on fossil fuels for power generation, with China, the region's largest data centre market, mostly using coal power. The reliance on coal power raises environmental concerns, particularly given increased water stress in some Asian markets, which might cause service outages in data centres that rely on water for cooling and humidity control.
To address these concerns, APAC governments have begun to regulate the environmental impact of data centres. China has released an action plan for the sustainable development of data centres, aimed at improving energy efficiency and promoting the use of renewable energy.
In light of these developments, data centre developers and tenants in markets with net-zero targets are encouraged to engage in long-term corporate power purchase agreements to access renewable energy sources and mitigate their exposure to carbon transition risks, as advised by Moody’s.
APAC data centre capacity set to double by 2028, driven by GenAI demand.
Moody’s forecasts a 20% annual growth rate in data centre capacity in APAC.
S&P Global predicts significant market share gains for APAC in generative AI software by 2028.
Source: SCMP