John Lam states, “We expect a supply CAGR of 17-18% during the same period. We estimate a 16% probability of an APAC data center supply glut."
FinTech BizNews Service
Mumbai, May 20, 2025: UBS has come out with a special report, authored by John Lam, Managing Director at UBS, Head of APAC Property & Greater China Property Research titled, “Will APAC data centers be oversupplied in 2030?”
This data center cycle looks different
APAC data center (DC) capacity rose at a 27% CAGR over the past five years and looks set to grow even faster over the next three years. Will demand keep pace? Or are we facing a short-term overbuild akin to China in 2021 or fibre in the early 2000s? Which countries are best positioned? Are data center operators or power supply chain a more attractive investment? Collaborating with UBS Evidence Lab, 12 analysts across 11 verticals and covering 49 stocks, we conclude that demand is sufficiently robust to absorb rapid capacity growth. Our Monte Carlo simulations indicate minimal risk of a region-wide supply glut.
Which countries look best positioned?
We forecast a strong demand CAGR of >20% for 2024-30E driven by increasing cloud migration (fuelled by AI) along with an AI multiplier of over 2x. Our top-down demand analysis captures GDP growth, cloud infrastructure demand, AI demand and cloud penetration adjusted for country-specific factors like land availability, energy supply and Government policy/regulations. Working with UBS Evidence Lab and other sources of data, we expect a supply CAGR of 17-18% during the same period. We estimate a 16% probability of an APAC data center supply glut. Among countries, China is most likely to have supply glut, we believe Singapore, Malaysia and South Korea data center operators look best positioned, taking into account of demand, supply, power constraints and valuation.
Invest in data center operators vs power supply chain?
Given rising data center demand, we think some countries will likely face power constraints, based on UBS Utilities team estimates, in particular Japan and India. This poses investment opportunities for the power supply chain, eg, power grid, transformer, stable system, diesel generator and liquid cooling. Using HOLT valuations, liquid cooling and stable system look more attractive than data center operators/developers, while power generator, chemical materials, grid operator, gas turbine, and transformer look less attractive.
Stock implications
Based on country advantages, HOLT valuation and bottom-up analyst views, our top picks for the data center expansion theme include Keppel DC REIT and Singtel in Singapore; Gamuda and Telekom Malaysia in Malaysia; NextDC, DigiCo and Infratil in Australia/NZ; Bharti Airtel in India; and GDS in China.
