AI Boomtown Surges in a Once Overlooked Tech Industry Region

Three years ago, Gary Goh was leading a property development company in Malaysia when his clients began inquiring about land for data centers. At the time, Goh knew little about these facilities, their shape, or their purpose beyond a vague understanding that they housed vast amounts of data for technology companies. However, as demand for these centers continued to rise, Goh saw a business opportunity and decided to resign from his position to capitalize on the trend.

In the past three years, the southern Malaysian state of Johor has become a hotbed for artificial intelligence (AI) infrastructure development, reshaping the landscape with massive data centers. Located just north of Singapore, Johor was previously known for its palm-oil plantations and wetlands, not technology. Now, it is one of the world’s largest construction sites for AI-driven data centers, with projects backed by some of the biggest names in tech.

ByteDance, the parent company of TikTok, is investing $350 million in Johor’s data centers. Microsoft has also made a major move, acquiring a 123-acre plot for $95 million. Additionally, asset management giant Blackstone paid $16 billion to purchase AirTrunk, a company that operates data centers across Asia, including in Johor, where it runs a facility the size of 19 football fields. Oracle has also announced plans to invest $6.5 billion into Malaysia’s data-center industry.

According to Maybank, a regional bank, data-center investments in Johor are expected to hit $3.8 billion in 2024, underscoring the area’s growing importance in the AI and cloud computing sectors. The state’s rapid transformation has been driven by its geographical advantages and the global tech industry’s insatiable appetite for data-processing power.

Johor’s rise as a global AI hub can be attributed to several factors. First, it offers vast tracts of affordable land, abundant energy—primarily coal—and plenty of water to cool the massive servers that make up data centers. This availability contrasts with places like Northern Virginia, which is the world’s largest data-center market but is facing dwindling resources of land, power, and water. Malaysia’s stable political climate and friendly relationships with both the U.S. and China also help mitigate the risk for tech companies from these rival nations.

Johor's proximity to Singapore is another key advantage. Singapore, known for its vast network of undersea internet cables, serves as a crucial global data hub. These cables allow data to flow seamlessly across the globe, providing the connectivity tech companies require for AI and cloud computing. However, in 2019, Singapore placed a moratorium on new data centers due to energy constraints, leaving neighboring Johor as the next best option for expansion.

Rangu Salgame, CEO of Princeton Digital Group, a data-center operator that serves some of the world’s largest tech companies, highlights the significance of Johor’s location. While these data centers are situated in Malaysia, their role is global. Johor’s infrastructure is helping to power AI technologies such as chatbots and autonomous vehicles worldwide. The data centers in Johor are being developed to meet global demand, not just Malaysia’s.

Salgame also notes the crucial role that third-party data-center operators play in the tech industry. While major tech companies like Amazon, Google, and Meta run their own data centers, they rely on third-party operators for about 30% of their data-center needs in the U.S. and 90% internationally. These third-party companies construct the centers—often without having secured tenants in advance—before leasing them to tech companies to install their own hardware.

Johor's data-center market is evolving at an unprecedented pace. Three years ago, the region had less than 10 megawatts of data-center capacity. Today, it has 0.34 gigawatts of active capacity, with an additional 2.6 gigawatts under construction, according to DC Byte, a data-center research firm. In comparison, Northern Virginia, the largest data-center market in the world, has 4.2 gigawatts of active capacity, with an additional 11.4 gigawatts in the pipeline.

Local government officials in Johor have embraced the influx of investment, streamlining the approval processes for these projects. Salgame’s company, for instance, was able to take its Johor center from proposal to operation in just 15 months. However, the rapid pace of development has also sparked concerns about the region’s resources, particularly water. Johor Bahru Mayor Mohd Noorazam Osman has urged the government to strike a balance between economic growth and local needs, suggesting that more desalination plants be built to address potential water shortages.

For former property developer Gary Goh, Johor’s data-center boom has been a business opportunity like no other. After leaving his job, he began consulting for buyers and sellers of land suitable for data centers. His expertise lies in identifying plots of land that can be easily converted for this purpose—land with easy access to power lines, water, and infrastructure. One of his success stories is in Iskandar Puteri, a city in Johor where telecom carriers recently broke ground on a 42-acre data-center site.

The lot, though not perfect, as it requires a hill to be leveled before construction can continue, is ideally situated with power lines and water pipes already in place. “These conditions are hard to come by,” Goh said during a visit to the site.

Johor’s rapid transformation from a rural backwater into a global AI and cloud computing hub illustrates how the demand for data and AI technology is reshaping regions around the world. As tech companies continue to push the boundaries of AI, the infrastructure to support these innovations must expand just as quickly. Johor’s evolution is a testament to how the right combination of factors—land, power, water, political stability, and proximity to global data routes—can turn even the most unlikely locations into global tech powerhouses.

In the coming years, Johor is expected to become one of the world’s largest data-center markets, second only to Northern Virginia. For now, the region is riding the wave of AI-driven development, reshaping its landscape and positioning itself as a key player in the global technology economy.