KUALA LUMPUR (Jan 17): A large majority of data centres planned in Malaysia are likely to pass through the tightening US restrictions, limiting the potential impact on power demand growth, CGS International said.
About 60% to 70% of the 4.7-gigawatt worth of electricity supply agreements signed with data centre operators are likely to fall under the preferred category of users — the universal validated end users and the national validated end users — CGS International said in a note on the utilities sector.
“The impact on the expected rise in power demand in Malaysia should be largely contained,” CGS International said. The house maintained its ‘overweight’ call on the sector.
On Wednesday, the US put 25 Chinese firms and two Singapore-based companies on a restricted trade list, including Sophgo Technologies Ltd, which the Biden administration claims are acting at the behest of Beijing to further their goals of indigenous advanced chip production.
The restrictions followed controls announced two days earlier on advanced computing chips crucial for data centres and the spread of artificial intelligence (AI) technology.
CGS International has Tenaga Nasional Bhd (KL:TENAGA) and Malakoff Corporation Bhd (KL:MALAKOF) as its top picks for the utilities sector, as they are indirect beneficiaries of the surge in foreign direct investments for data centres in Malaysia.
'Most telcos do not need advanced chips'
Meanwhile, the risk of the new US restrictions to telcos’ data centre business is likely to be small, as most do not require advanced processors, said CGS International.
Less than 10 megawatts of the 75-megawatt capacity Telekom Malaysia Bhd (KL:TM) will have by end-2026 is currently slated for AI workloads, the research house noted. The risk to connectivity services will also be “low”, as revenue from the services has been insignificant so far, it said.
“Telcos have also made it clear that in some jurisdictions, smaller operators with single runs of fibre have also sold dark fibre to operators, thus reducing the connectivity revenue of the incumbent telcos,” CGS International added.