Malaysia’s technology sector continued to thrive in 2025, fuelled by rapid advances in artificial intelligence (AI) and a surge of data centre investments, as strategic competition between the United States and China drives companies to diversify their regional presence.
Malaysia remained a top destination for global tech investors, with Penang and Johor standing out as the country’s leading innovation hubs. Penang—often referred to as Malaysia’s Silicon Valley—continued to attract semiconductor and high-value electronics manufacturers, supported by a strong supply chain and deep engineering talent. Johor, meanwhile, has emerged as one of Southeast Asia’s fastest-growing data centre clusters, benefiting from Singapore’s digital spillover and drawing billions in cloud, AI, and hyperscale infrastructure investments.
Government incentives, industry partnerships, and rising investor confidence have strengthened Malaysia’s position on the regional tech map. Supportive policies under the Malaysia Digital Economy Blueprint (MyDIGITAL), along with robust foreign investments in cloud and data infrastructure, continue to anchor the sector’s growth.
Prime Minister Datuk Seri Anwar Ibrahim highlighted the role of tax breaks, R&D incentives, and cross-industry collaboration in accelerating Malaysia’s technological capability and talent development.
Investments in 2025
In the first half of 2025 (1H 2025), AI-related investments reached RM13.29 billion. The data centre and cloud segment remained the largest contributor under the Malaysia Digital initiative, accounting for RM30.95 billion in approved investments.
Malaysia recorded RM190.3 billion in total approved investments across all sectors in 1H 2025, according to the Malaysian Investment Development Authority (MIDA)—an 18.7% increase from the previous year. Of this total, RM88.3 billion (46.4%) aligned with the National Investment Aspirations (NIA) priority sectors, including advanced technology, digitalisation, and green growth.
Between 2021 and June 30, 2025, a total of 143 data centre projects were approved, with investments valued at RM144.4 billion and 1,429 new jobs created. Major global tech companies—including Microsoft, Google, and Amazon Web Services (AWS)—also announced significant commitments to Malaysia.
On July 29, YTL Power International and Nvidia signed a US$2.36 billion agreement to develop AI infrastructure in Malaysia. The nation’s first Nvidia-powered AI data centre in Johor began operations on Oct 31. AirTrunk also unveiled plans for its second Johor-based hyperscale facility, AirTrunk JHB2.
Basis Bay’s collaboration with ST Telemedia Global Data Centres was highlighted as a strong example of regional partnerships bolstering Malaysia’s digital hub status.
Data Centre Expansion Gains Momentum
Malaysia’s data centre market surged in 2025, driven by strong demand for cloud computing and AI workloads. The country now hosts 119 data centres across 15 locations, with Johor projected to account for 60% of national capacity by 2030.
Prime Minister Anwar noted that the services account recorded a RM0.7 billion surplus in the third quarter of 2025—its first surplus in 14 years. He attributed this to strategies under the MADANI Economy framework, digital transformation via the New Industrial Master Plan (NIMP), the National Semiconductor Strategy (NSS), and growth in high-impact sectors such as data centres.
While data centre development requires heavy initial imports, Anwar emphasised that these assets eventually generate strong service exports once operational.
Strengthening Malaysia’s Role in the Global Tech Landscape
As ASEAN Chair in 2025, Malaysia played a key leadership role in regional digital initiatives, including the ASEAN Technology Cooperation and Development Summit and the ASEAN Digital Ministers’ Meeting—focusing on AI regulation, cybersecurity, and digital economy frameworks.
Negotiations for the Digital Economy Framework Agreement (DEFA) advanced significantly, with the agreement expected to be finalised and signed in 2026.
Malaysia also deepened its economic ties with the United States through the Malaysia-US Agreement on Reciprocal Trade (ART), signed on Oct 26 by Prime Minister Anwar and U.S. President Donald Trump during the 47th ASEAN Summit. The agreement grants duty-free access for over 1,700 categories of Malaysian goods—especially electronics—strengthening Malaysia’s position as a trusted supply chain partner.
The government is also intensifying its push to develop a globally competitive semiconductor ecosystem, focusing on integrated circuit (IC) design and higher-value manufacturing. According to the Malaysia Semiconductor Industry Association (MSIA), the NSS underscores Malaysia’s long-term commitment to developing talent, encouraging strategic investments, and fostering collaboration between industry stakeholders and local startups.
Outlook
The Digital Ministry expects 2026 to be a pivotal year in Malaysia’s journey toward becoming an AI-driven nation. Its vision goes beyond technology adoption, aiming to build a holistic ecosystem of talent, policy, digital trust, and innovation.
To support this ambition, RM1.36 billion was allocated to the ministry under Budget 2026, including RM248.5 million for operations and RM1.11 billion for development programmes.
Analysts remain optimistic about Malaysia’s tech sector in 2026, citing strong government support, continued investor interest, and sustained momentum in AI and data centre development.
