Investment upcycle poised to widen from data centre boom

PETALING JAYA: Malaysia’s economy has maintained strong investment interests, marked by its third upcycle so far which has led analysts to believe it is likely to remain intact, going forward.

This was backed by a surge in data centre or DC development – fuelled by rising demand for artificial intelligence (AI) despite fresh scrutiny of news of underutilised facilities surfacing.

AmBank Group said investment activities have solidly picked up since the beginning of 2024, whereby real gross fixed capital formation (GFCF) growth averaged at 11.1%.

It took note of the fact that the upcycle will, however, grow at a moderating pace.

Looking at the GFCF ratio to the gross domestic product (GDP), it hit a peak of 23.8% in the second quarter of this financial year (2Q25) before dipping slightly to 21.7% in 3Q25.

It is worth noting that the last time Malaysia experienced investment upcycles was in 2010 to 2013.

In a report the bank said if previously upcycles were buoyed by both the private and public sector, this time around, it was on the back of mainly the private sector.

It noted for the first nine months of financial year 2025 (9M25), approved private investments hit RM285.2bil.

“A further breakdown shows that investments lead growth in GFCF in structures, information, communications and technology equipment, and other machinery; as such, we attribute this upswing to technological advancements, particularly AI,” it noted.

In contrast, AmBank said public investment has been more modest, with its share of GDP easing to below 5%, this trend aligns with the government’s fiscal consolidation agenda.

However, it is confident the government is on track to achieve its deficit target of 3.8% this year and 3.5% next year.

To continue with the upward trajectory, AmBank said policy clarity, efficient implementation of national strategies and a supportive macroeconomic environment will be vital.

It added globally, competition for investments have intensified.

“Approved foreign private investment totalled RM510.4bil in 2023 to 9M25, while net foreign direct investment inflows amounted to only RM115.8bil over the same period.

“This gap suggests that investment realisation is typically staggered over multiple years and may be subject to shifts in global economic sentiment,” AmBank explained.

Moving forward, future investments will be underpinned by ongoing global demand in key industries.

“The DC segment could encourage demand for local suppliers and contractors, as well as service providers, among others.”

On another note, concerns over the potential stranded infrastructure and inefficient resource use from DCs arose after Deputy Investment, Trade and Industry Minister Liew Chin Tong said many facilities were utilising less than half of their stated electricity capacity.