AI to send Asia's data centre spending and power needs up; Morgan Stanley picks the winners
[SINGAPORE] Data centre investments in Asia will likely double to US$200 billion by 2030, as the rising use of artificial intelligence (AI) will powers the demand for digital infrastructure and electricity, say Morgan Stanley analysts.
In a report on Monday (May 26), the bank said the surge in capital expenditure is set to tighten regional power markets far sooner than previously expected.
The analysts noted that power consumption across Asia is outpacing even the bullish forecasts, on the back of broader AI adoption, reshoring of supply chains, and a rise in advanced manufacturing.
Morgan Stanley has thus raised its power-demand growth forecast by 30 basis points through 2030 – its second upward revision this year.
Key markets such as China, Japan, Malaysia and Thailand are experiencing the sharpest growth; their data centres alone are expected to consume 100 gigawatts (GW) of electricity by 2030, accounting for a sixth of Asia's incremental power demand.
Undervalued power-chain opportunities emerge
In 2024, data centres accounted for around 1.5 per cent of the world's electricity consumption; power usage has grown at a 12 per cent compound annual rate since 2017. As AI applications broaden, this rise is expected to persist – bringing with it pressure on power infrastructure.
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Morgan Stanley's analysts emphasised that natural gas will play a central role in powering AI, working in tandem with renewables.
But they argue that markets have yet to fully price in the beneficiaries of the 'time-to-power' dynamic – given that grid operators and natural gas-fired plants can provide a reliable, dispatchable supply of electricity on shorter timeframes.
The Morgan Stanley report also identified second-order beneficiaries, such as gas pipeline suppliers, amid rising US gas exports and regional energy needs.
Infrastructure firms focused on clean-energy integration, grid modernisation, advanced cooling systems and battery storage are also expected to play increasingly critical roles.
Notably, 2024 marked the return of pricing power for equipment manufacturers – a trend Morgan Stanley expects to extend downstream to generators, transmission operators and midstream providers.
Asia powering AI-exposed stocks
Morgan Stanley analysts have issued a string of 'overweight' calls on stocks expected to benefit from these trends in power demand.
Equity analyst Mayank Maheshwari at Morgan Stanley has placed an 'overweight' call on integrated-energy provider Reliance Industries in India, and added a target price of 1,617 rupees, an upside of 13.3 per cent from its last close.
He has also made an 'overweight' call on Malaysian grid operator Tenaga Nasional with a target price of RM16.30, a 16.4 per cent upside from its last market close.
Single grid operators benefit from doubling power demand, he said.
Hybrid power operators are likely to also gain from increased clean-power demand from data centres; analysts have placed an 'overweight' call on such players, including companies such as China Resources Power.
But Maheshwari believes that the demand faced by Gulf Development will come from integrated data centres and its generation portfolio. He has raised the Thai company's target price by 43.8 per cent from its last close to 69 baht.
Morgan Stanley analyst Eva Hou has placed an 'overweight' call on Chinese power grid equipment manufacturer Nari Technology, given that growth in demand for power demand requires enhanced grid capacity, thus favouring companies in this niche.
Japanese gas turbine operator Mitsubishi Heavy Industries was also given an 'overweight' call. Morgan Stanley analyst Yoshinao Ibara projected that higher demand for gas baseloads would drive turbine sales.
However, he lowered Mitsubishi's target price by 6.5 per cent to 3,000 yen.
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