SYDNEY/HONG KONG/SINGAPORE -- Global private equity investors and asset managers are readying for billions of dollars worth of M&A and investments linked to data centers in Asia Pacific, as the artificial intelligence (AI) boom fuels demand for digital infrastructure.

The intense pace of deals in the world's most populous region comes as countries and companies respond to booming demand for AI, calling for more data capacity, industry executives said.

Asia Pacific, including Japan, has led dealmaking activities in the global data center market this year, with M&A value totalling $840.47 million, more than half of the global amount, LSEG data showed.

In 2023, the region's data center deals hit a record high of $3.45 billion, according to LSEG. That tally is set to be surpassed this year with at least a couple of large transactions in the pipeline.

A number of financial sponsors, including global investment powerhouse Blackstone Inc (BX.N) are looking to acquire AirTrunk, which owns 11 hyperscale data centers in Australia and the rest of the region, sources close to the transaction said.

AirTrunk owners, Macquarie Group (MQG.AX) and Canada's Public Sector Pension Investment Board (PSP), are aiming to value the business at up to A$15 billion ($9.8 billion), sources said, in what could be Asia's largest data centre transaction this year.

AirTrunk, Blackstone, Macquarie and PSP declined to comment.

"The AI revolution is creating an unprecedented wall of demand for high quality data center capacity," said Garren Cronin, managing director of Cadence Advisory, which advised on Australian data center operator NEXTDC's $861 million capital raising in April.

"The new capacity that needs to be built in Asia Pacific in the next three to five years is simply mind blowing. My expectation is that deal flow in the data center space will intensify in 2024."

Microsoft Corp (MSFT.O) last week said it would invest $2.2 billion over the next four years in Malaysia to expand its cloud and AI services across Asia.

The rise of data center investments in Asia follows a similar trajectory to that seen in the U.S. and Europe with technology giants including Amazon (AMZN.O), Microsoft, Alphabet Inc (GOOGL.O), and Meta Platforms (META.O) rapidly expanding their AI capabilities.

Microsoft will open its first Asian data center in Thailand, the company said last Wednesday, a day after announcing $1.7 billion worth of investments in AI and cloud facilities in neighboring Indonesia.

Data consumption

Other potential deals in Asia include Indonesia's state-owned Telkom Indonesia (TLKM.JK)'s sale of a stake in its data center business worth $1 billion and Japan's NEC weighing $500 million data center sale, according to news reports.

Telkom Senior Vice President Investor Relations Ahmad Reza told Reuters on Wednesday that Telkom is open to strategic partnerships to bring its data center business arm NeutraDC new capabilities and new markets.

"We have explored several potential partners, but we are still evaluating for the best one," he said. "We expect to finish this process by the end of this year."

NEC said it was not able to comment on market speculation.

U.S. investment firm Bain Capital is seeking credit financing for the international assets of data center operator Chindata and investments for its China business, people close to Bain Capital said.

Bain, which took Chindata private from the Hong Kong bourse last year in a $3.16 billion deal, declined to comment.

Goldman Sachs Asset Management (GSAM), which invested in AirTrunk in 2017 before selling its stake to a Macquarie-led consortium three years later, has deployed more than $1 billion on data center development in Asia over the past three years.

The firm would actively invest in additional projects, with a particular focus on Japan and South Korea, said Nikhil Reddy, head of APAC real estate at GSAM.

"AI creates a different type of need for data centers beyond the historic demands of the cloud focused on low latency. Now with AI, which entails massive data consumption, capacity is key," he said.

($1 = 1.5103 Australian dollars)