Our country is forecast to be the largest data centre market in SE Asia by 2035.

Data centres are the lifeblood of (almost) every company.

They are physical locations that host servers, storage drives, and networking equipment crucial for data management.

Because of this, data centres require substantial resources, including vast amounts of energy to power the servers, space to accommodate the equipment, and lots of water for cooling systems to prevent overheating.

Global tech giants have all invested billions of dollars in our country, specifically Johor.

According to MIDA, foreign investment in the state rose 580% from 2019 to 2022, to RM58.8 billion.

In the past year:

• China's ByteDance, the parent of TikTok, announced plans to invest RM10 billion to set up an AI hub in Malaysia, with an additional RM1.5 billion allocated in Johor to expand its data centre facilities.

• Nvidia and YTL have sealed a US$4.3 billion investment deal to develop AI infrastructure in Malaysia, with the project to be hosted at a data centre in Johor.

• Eco World has sold land in Johor to Microsoft, which will be used to develop a data centre site over the next four years, as part of the tech giant’s US$2.2 billion investment in cloud computing and AI services in Malaysia.

Why are investors choosing Johor?

The reasons are quite obvious.

• We have abundant energy.

• We have massive space and lots of water.

• Our land is much cheaper versus Singapore.

• The Sultan of Johor (AKA. our King) is very investor friendly.

Johor spurred investment by slashing approval times from three months to as little as seven days, while Singapore, which has limited energy resources and space, placed a three-year delay on the construction of data centres.

The southern state currently hosts 13 data centre facilities across more than 1.65 million square feet of land mass. It is the largest data centre market in Malaysia, and the 9th largest in Asia Pacific.

Which companies will benefit from this?

1) Tenaga Nasional (TENAGA)

The data centre boom is expected to increase the demand for power, which will raise TNB’s capital expenditure to RM90 billion until 2030.

• Current share price: RM14.00

• Target price: RM16.00 (By Public Bank Investment Bank)

2) Inari Amertron Berhad (INARI)

RHB Investment Bank and CGS International expects INARI’s growth to be subdued in the near term due to weaker smartphone demand.

However, most research firms foresee a brighter financial year 2025 (FY25) for the group, driven by the AI and data centre rush and contributions from new products.

• Current share price: RM3.70

• Target price: RM4.16 (By Affin Hwang)

3) YTL Corp Berhad (YTL)

Despite surging over 100% to an all-time high of RM3.92 since the start of the year, analysts are still optimistic on YTL, as the utilities group sealed deals with Nvidia, Singapore’s Changi Terminal 5, and various MRT projects.

• Current share price: RM3.57

• Target price: RM4.19 (By MIDF Research)

4) Telekom (TM)

Malaysia’s largest telco company will benefit from the rising number of data centres across the country. Specifically, Hong Leong Bank Research (HLIB Research) expects fibre demand to surge, as high speed data transfers become crucial.

• Current share price: RM6.88

• Target share price: RM7.16 (By HLIB Research)

Since the start of the year, these four companies have rallied by 27% to 85.5%, with YTL being the biggest winner.

Apart from Data Centres, Malaysia is set to be the next global chip giant.

The Malaysia Semiconductor Industry Association (MSIA) forecasts semiconductor exports to hit RM1.2 trillion by 2030, representing a compound annual growth rate (CAGR) of 7.6% from the current export value.

How big is our semiconductor industry?

We are currently the sixth largest exporter in the world, occupying 7% of the global market share and 23% of US semiconductor trade in 2022.

In 2023, Malaysia exported RM1.426 trillion worth of products.

40.3% of it went to E&E products, mainly comprising of semiconductors.

Over the recent years, Malaysia has emerged as a hotspot for semiconductor companies.

This rise in prominence is largely driven by the need for companies to diversify their operations due to increasing US-China tensions. We are often seen as the "middleman" between these two superpowers.

Intel, GlobalFoundries, and Infineon are some of the notable chip makers that have set up or expanded their operations in Malaysia during this period.

Looking ahead, MIDA is confident that Malaysia's semiconductor industry will continue to shine.

What does this all mean for you?

Our nation will prosper not only from the setting up of data centres and exporting semiconductors. The ecosystem around them will create new jobs and economic opportunities.

This will boost Malaysia’s attractiveness for AI and tech companies worldwide. 🚀

That’s all for this week’s newsletter!

Disclaimer: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.

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