Although the data centre (DC) boom in Malaysia will continue, the nation is said to be unlikely to keep pace with the surging demand for it.

Instead, Macquarie Research said Thailand will start reaping the benefits of surging DC demand, driven by new investments from Amazon.com Inc and Google LLC in the country's Eastern Economic Corridor that fuel the rapidly growing demand for digital service.

"We believe Thailand's DC rush is just beginning," said Macquarie Research in a Nov 29 report.

Analysts from the research house noted that Thailand will benefit from the shift to the so-called "site to power" model, where electricity-guzzling DCs are built where they can access power, rather than trying to get power to preferred sites.

"As the 'site to power' model becomes increasingly dominant, DC operators and investors will need to prioritise markets with robust power infrastructure to stay ahead in this competitive landscape," they said in the report, noting Thailand's advantageous power conditions and supportive regulations.

To meet the demand for infrastructure and computing power to enable artificial intelligence (AI), global tech players are stepping up the building of DC.

The World Economic Forum estimates that generative AI systems might already use around 33 times more energy to complete a task compared to task-specific software.

Southeast Asia is benefitting from the rush, in particular Malaysia, after Singapore halted the building of DCs between 2019 and 2022. Multibillion-dollar investments such as those by Google to build DCs are expected to double Malaysia's current capacity to around one gigawatt over the next two years. However, there are signs that Malaysia may be straining under the power requirements of such investments. Last month, it was reported that Johor had rejected almost 30% of DC applications in the past five months as the authorities were trying to focus on conserving resources and regulating the industry to ensure maximum benefits for the local economy.

While Macquarie's top pick for Thailand is Gulf Energy Development pcl, its top picks for Malaysia are YTL Power International Bhd and Tenaga Nasional Bhd (TNB). It likes TNB as a beneficiary of rising DC demand, while it expects YTL Power to commission its AI DC in mid-2025 with "early access" to Nvidia Inc's GB200 servers.