The rise of generative AI and large language models is transforming the data centre industry, with a significant shift towards hyperscale facilities. UOB Kay Hian’s latest report highlights that these expansive data centres, which offer unmatched efficiency and scalability, are becoming essential to meet the growing computational demands of AI technologies. The report maintains an “OVERWEIGHT” rating on the sector, recommending a “BUY” for Keppel DC REIT (KDCREIT) and Digital Core REIT (DCREIT), whilst downgrading Mapletree Industrial Trust (MINT) to “HOLD”.
Hyperscale data centres, characterised by their large power capacities of 20-50MW and above, are increasingly favoured due to their ability to support high-density computing. According to Synergy Research, the number of such centres rose by 144 to 1,136 in 2024, with major cloud providers like Amazon Web Services, Google Cloud, and Microsoft Azure accounting for 59% of this capacity. This trend is expected to continue, with hyperscale capacity projected to double every four years.
The report also notes the emergence of gigawatt data centres, with significant investments from tech giants like Meta Platforms and joint ventures such as Stargate. These facilities require dedicated power plants to support their massive energy needs.
Singapore is well-positioned to benefit from this trend, given its status as a connectivity hub with low latency applications. However, the city-state faces challenges due to power constraints and a tight vacancy rate of 2%. The government aims to invest at least $7.3b (S$10b) to enhance its infrastructure, supporting the burgeoning AI applications.
As the demand for AI-ready data centres grows, the leasing model is gaining traction among hyperscalers, offering a more flexible and cost-effective approach. This shift is expected to reshape the data centre landscape, with enterprise on-premises data centres projected to decline in capacity share.
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