SYDNEY/HONG KONG/SINGAPORE — As the artificial intelligence (AI) boom intensifies, global private equity investors and asset managers are preparing for an influx of mergers and acquisitions (M&A), as well as significant investments linked to data centers in the Asia Pacific region. This surge is driven by the escalating need for digital infrastructure to support the increasing demands of AI technologies.
In 2023, the Asia Pacific region, including Japan, has been at the forefront of dealmaking activities within the global data center market. According to data from London Stock Exchange Group (LSEG), the region accounted for M&A values totaling $840.47 million, representing more than half of the global amount. This trend is not new; last year, the region’s data center deals reached a record high of $3.45 billion. With several major transactions already planned, 2024 is poised to exceed these figures significantly.
One of the most notable ongoing transactions involves global investment titan Blackstone Inc., which is reportedly considering the acquisition of AirTrunk. AirTrunk operates 11 hyperscale data centers across Australia and the Asia Pacific region. The current owners, Macquarie Group and Canada’s Public Sector Pension Investment Board (PSP), are contemplating valuing the business at up to A$15 billion ($9.8 billion). If successful, this could become the largest data center transaction in Asia this year.
Both AirTrunk and Blackstone, along with Macquarie and PSP, have declined to comment on these discussions.
Garren Cronin, managing director of Cadence Advisory, remarked on the market’s dynamics, stating, “The AI revolution is creating an unprecedented wall of demand for high-quality data center capacity.” Cronin, who recently advised on Australian data center operator NEXTDC’s $861 million capital raising in April, predicts that the necessity to construct new capacities in Asia Pacific will be “simply mind-blowing” over the next three to five years.
Microsoft Corp also announced significant investments in the region, planning to spend $2.2 billion over the next four years to expand its cloud and AI services across Asia. This includes establishing Microsoft’s first Asian data center in Thailand and announcing a $1.7 billion investment in AI and cloud facilities in Indonesia.
The growth trajectory of data center investments in Asia mirrors the expansions seen in the U.S. and Europe, with tech giants like Amazon, Microsoft, Alphabet Inc, and Meta Platforms rapidly scaling their AI capabilities.
Additional prospective deals in the region include:
- Indonesia’s state-owned Telkom Indonesia exploring the sale of a stake in its data center business, NeutraDC, potentially valued at $1 billion.
- Japan’s NEC Corporation considering a $500 million data center sale.
Ahmad Reza, Senior Vice President of Investor Relations at Telkom, mentioned that the company is open to strategic partnerships to enhance NeutraDC’s capabilities and market reach. “We have explored several potential partners, but we are still evaluating for the best one,” Reza said, aiming to conclude the process by year-end. NEC, on the other hand, has not commented on the market speculation.
U.S. investment firm Bain Capital is actively seeking credit financing for the international assets of data center operator Chindata, as well as investments for its business in China. Bain, which privatized Chindata from the Hong Kong bourse last year in a deal worth $3.16 billion, has declined to comment on these plans.
Goldman Sachs Asset Management (GSAM), which previously invested in AirTrunk before selling its stake to a Macquarie-led consortium, has invested more than $1 billion in data center development across Asia in the past three years. Nikhil Reddy, head of APAC real estate at GSAM, highlighted the evolving demands driven by AI. “AI creates a different type of need for data centers beyond the historic demands focused on low latency. With AI, which entails massive data consumption, capacity is key,” Reddy explained.
The ongoing developments and strategic investments in the data center sector across the Asia Pacific underline the region’s critical role in the global digital economy, especially as the world leans more into AI technologies. With substantial investments and strategic deals in the pipeline, the landscape of digital infrastructure in Asia is set for significant transformation in the coming years.
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