What had looked like a regional industrial juggernaut earlier in 2026 has slowed as resource constraints, land limits and sustainability rules catch up with a surge in demand driven by large language models and artificial intelligence. Thailand halted construction on 49 datacentre projects and froze approval decisions on 117 more in September 2026, as governments across south-east Asia grew more cautious about power and water use.
Malaysia absorbed much of the overflow. Operational capacity in Johor rose more than tenfold, from 94 MW in 2023 to 1,110 MW in 2026, with a further 3,088 MW under construction or planned. Malaysia and Thailand account for a large share of regional capacity.
Microsoft announced a $2.2 billion investment in 2024 for cloud and AI infrastructure in Kuala Lumpur and Johor. AirTrunk said it planned to invest $3 billion to expand from two to four campuses in Johor. Microsoft is also building five datacentres as part of a $1.7 billion investment in the country. Princeton Digital Group and Digital Edge are expanding as well.
Johor is drought-prone. Current operational datacentres there are estimated to need about 675 million cubic metres of water a day. Datacentres’ water use has become a major concern for officials across the region.
Indonesia has a 1,699 MW pipeline in greater Jakarta and is developing Batam as a second hub. Other south-east Asian countries are catching up, but resource pressure has forced more circumspect approvals.
Through the 2010s Singapore was the region’s leading hub, with companies including Alibaba and Facebook opening facilities there. As AI-related demand rose, operators looked beyond Singapore. Singapore then became selective. Cushman and Wakefield figures show only 95 MW of operational capacity was added between 2023 and 2026.
Thailand’s energy minister, Akanat Promphan, said datacentres need large amounts of power from expensive imported gas and called for a new electricity user category with higher tariffs. Bangkok later announced an approval framework that weighs energy and water use, power guarantees and higher tariffs for operators. Protesters have raised dust from construction near homes and the risk to water supplies. One critic said authorities were piping water from a shallow, strained reservoir to industrial estates.