Global Giants KKR, Bain Capital Target Asia's Rising Data Center Space Amid AI, Cloud Services Upswing

Global investors are turning their attention to Asia, lured by the region’s soaring computing and data storage needs, driven primarily by the surge in artificial intelligence (AI) and cloud services. Private equity firms KKR & Co Inc KKR and Bain Capital are leading the pack, making substantial investments in data centers across Asia.

What Happened: Global investors view Asia as the next prime target for data center investments, thanks to the region’s swiftly expanding computing and data storage needs. The demand is being propelled by the ongoing AI explosion, cloud services growth from behemoths like Amazon.com Inc AMZN and Alphabet Inc GOOG GOOGL, and rising data and storage requirements due to the region’s burgeoning population, according to a Bloomberg report.

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According to data from Cushman & Wakefield, demand in Southeast Asia and North Asia is predicted to grow approximately 25% annually until 2028, significantly surpassing the 14% annual growth in the U.S. Both Bain Capital and KKR have already made noteworthy moves in this space. For instance, in August, Bain Capital announced a deal to privatize Beijing-based data center business Chindata Group Holdings with an equity value of $3.2 billion. Similarly, in September, KKR agreed to purchase a 20% stake in Singapore Telecommunications Ltd‘s SGAPY regional data center business for approximately $800 million.

Udhay Mathialagan, global head of Brookfield Asset Management Ltd.'s data center business, stated, "The U.S. leads, with Europe following, and Asia Pacific catching up after a slight time lag. Despite diversity, the commonality in Asia is that everyone is online. Phenomenal connectivity and top-notch data centers are essential."

Why It Matters: This shift in focus towards Asia’s data center space comes in the backdrop of several key developments. Back in May, Amazon announced its plan to invest a whopping $12.7 billion to strengthen its cloud infrastructure in India by 2030.

However, the journey is not without hurdles. Data center development is a complex process requiring knowledge of real estate, technology, local regulations, and environmental requirements, and the highly fragmented Asian market further complicates these factors. Despite these challenges, the potential returns seem to outweigh the risks, with the anticipation that Asia will make up a larger portion of global cloud revenue in the near future.

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