APAC data center demand is strong, with power constraints becoming the core supply bottleneck

Overview

This report summarizes Goldman Sachs' APAC data center Corporate Day held in Singapore on March 31, 2026. The event included three panel discussions and meetings with eight companies, covering APAC data center demand, financing conditions, supply bottlenecks, and operating and valuation highlights for Keppel, Keppel DC REIT, NTT DC REIT, GDS, and VNET. The key conclusion is that underlying data center infrastructure demand remains resilient; near-term concerns about an AI bubble are more concentrated at the application layer, while compute, connectivity, and data center infrastructure demand have stronger long-cycle support.

Core views

The report's core views are: first, APAC data center demand has good visibility over the next 3-5 years, and customer commitments and contract terms are more favorable to owners; second, supply is constrained by power, grid interconnection, and regulatory approvals, so platform companies that have pre-secured power and land resources benefit more; third, capital remains abundant, but data centers are fundamentally a development business, and value creation depends on stable returns, customer quality, contract tenor, and management execution; fourth, energy costs, key equipment supply chains, execution risks from scaling campuses, geopolitics, and data sovereignty are the main sources of risk; fifth, hardware/GPU technology obsolescence risk is significantly higher than the data center real estate asset itself.

Analysis framework

The report uses a combination of conference notes and company meetings. It first summarizes the industry-level demand, supply, and financing framework, then breaks down Singapore- and China-related companies separately. For Keppel Ltd, Keppel DC REIT, GDS Holdings, and VNET Group, the report combines management commentary, order/capacity/capex data, financing plans, and Goldman Sachs valuation methods to form investment views.

Methodology notes

• Valuation methodsSOTP valuation

  sum-of-the-parts valuation

  Keppel Ltd and GDS target prices use an SOTP framework. Keppel is valued by infrastructure, property, fund management and services, investments, and legacy assets; GDS is valued by China operations and businesses such as DayOne, while also applying a 10% holding company discount.

• Valuation methodsDDM valuation

  dividend discount model

  Keppel DC REIT's 12-month target price is based on a DDM approach, suitable for REIT assets centered on distributions and stable cash flow.

• Valuation methodsEV/EBITDA multiple

  enterprise value / EBITDA multiple

  VNET's 12-month target price is based on 2027E adjusted EBITDA and a 12x 12-month forward EV/EBITDA target multiple; some Keppel segments are also valued using EV/EBITDA.

• Factor analysisGS Factor Profile

  growth, financial return, valuation multiple, and composite factor percentiles

  Goldman Sachs factor profiles compare a stock's relative position versus the market and industry peers through growth, financial return, valuation multiples, and composite metrics, providing investment context.

• M&A probabilityM&A Rank

  probability ranking for M&A targets

  Goldman Sachs uses M&A Rank from 1 to 3 to assess the likelihood that covered companies become takeover targets, where 1 indicates a higher probability, 2 a medium probability, and 3 a lower probability.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Keppel Ltd (KPLM.SI)

  Goldman Sachs Buy rating, 12-month SOTP target price S$12.64.

  Strengths

  It has integrated infrastructure capabilities across data centers, power, cooling, submarine cables, and fund management; it can build platform moats in power-constrained markets; the 720MW Melbourne power bank and pre-leasing progress at Singapore SGP9 provide growth options.

  Weaknesses

  Because the business spans infrastructure, property, fund management, and legacy assets, the pace of execution and asset monetization will affect valuation release.

  Comparison

  Compared with pure data center operators, Keppel's advantage lies in integrated infrastructure and capital management capabilities rather than the scale of a single data center asset.

  Risks

  Slower-than-expected asset monetization, weaker integrated power margins, interest rate risk, and execution risk on large capex programs.

• Keppel DC REIT (KEPE.SI)

  Goldman Sachs Buy rating, 12-month DDM target price S$2.81.

  Strengths

  A pure data center REIT, with AUM of about S$5 billion, 62.4% of which is in Singapore; it benefits from Singapore's supply scarcity and stable demand; low leverage provides room for inorganic growth.

  Weaknesses

  Future rent resets may be smaller than the high base seen last year, and some smaller leases will see less upside from repricing.

  Comparison

  Compared with peers, Keppel DC REIT's Singapore exposure and sponsor pipeline provide a stronger base for organic and inorganic growth.

  Risks

  Rent resets or occupancy weaker than expected, dilutive transactions, and unfavorable FX and interest rate movements.

• NTT DC REIT (NTTD.SI)

  The report lists it as Not Covered, but provides company meeting highlights.

  Strengths

  Operating performance is solid, with CA1/3 driving occupancy ramp-up; SG1 renewal achieved a 23% rent reset and a three-year fixed 5% annual step-up; the acquisition pipeline includes a Frankfurt asset and sponsor assets in Japan.

  Weaknesses

  There is still concentrated exposure to the U.S., and some revenue is sensitive to utility price volatility.

  Comparison

  Compared with Keppel DC REIT, NTT DC REIT is more focused on reducing U.S. concentration through acquisitions and on shifting toward a target asset mix of 40% U.S., 30% Asia, and 30% Europe.

  Risks

  Higher utility prices, interest rate disruptions, acquisition financing dilution, or asset valuation volatility.

• GDS Holdings (GDS; 9698.HK)

  Goldman Sachs Buy rating, 12-month target price GDS US$55 and 9698.HK HK$54.

  Strengths

  A leading carrier-neutral data center operator in China, with 3.7GW of capacity reserve; it has already secured 200MW of orders and 500MW of MOUs year-to-date; tier-one market assets and western China AI cluster resources help capture hyperscaler demand.

  Weaknesses

  It usually takes about two years from construction to customer migration for new capacity, so earnings release depends on delivery, migration, and utilization ramp-up.

  Comparison

  Compared with smaller players, GDS has a scale advantage in developable capacity, key compute cluster resources, and capital recycling.

  Risks

  Migration demand and utilization improvement falling short of expectations, slower-than-expected overseas revenue and earnings ramp-up, weaker-than-expected pricing trends in China and overseas, customer churn, and a slower-than-expected deleveraging process.

• VNET Group (VNET)

  Goldman Sachs Buy rating, 12-month target price US$15.5.

  Strengths

  It is transitioning from traditional retail IDC to high-growth wholesale IDC; in 2025 it secured 336MW of wholesale orders, 70% from AI demand; it plans to deliver 450-500MW in 2026, with construction cost of about RMB 20k/kW and room for further decline.

  Weaknesses

  About 25% of revenue still comes from traditional businesses such as cloud computing and VAS, so the transition period requires strong financing, order capture, and delivery execution.

  Comparison

  Compared with new entrants, VNET has resource reserves, fast delivery capability, design and supply chain management capability, and existing customer relationships.

  Risks

  Insufficient financing, weaker-than-expected order execution, AI-related geopolitical risks, further deterioration in traditional businesses, or AI model training demand changing faster than expected due to technological shifts or unexpected developments.

Key data

• Event scale3 panel discussions, 8 companiesGoldman Sachs' 2026 APAC data center Corporate Day was held in Singapore on March 31.
• Industry demand visibility3-5 yearsDemand is supported by cloud adoption, enterprise digitization, digital-native populations, and early AI inference applications.
• Development yield and exit capitalization rateHigh single digits to teens; exit cap rate 6-8% in developing markets, 4-6% in mature marketsParticipants believe returns remain attractive, but strict underwriting is required.
• Keppel power reserve720MW power bank near MelbourneManagement said the project has already seen active inquiries and has access to power and water resources.
• Keppel private fund target IRR17-19%Management prefers power-constrained, low-vacancy markets and focuses on development cycle, exit cap rate, and yield on cost.
• Keppel DC REIT rent growth outlookMid-single-digit to low-double-digit market rent growthManagement expects the rent reset to remain supported by structural supply constraints, but slower than last year's +45% reversion.
• NTT DC REIT SG1 renewal23% rent reset, three-year fixed 5% annual increaseOperating performance remains solid, with an additional 2.7% weighted annual step-up.
• GDS YTD orders and MOUs200MW of orders, 500MW of MOUsMainly from leading hyperscalers in China; the 2026 sales target is 500MW.
• GDS capacity reserve3.7GWIncludes 700MW in tier-one markets and more than 3GW of AI cluster capacity in western China, with earliest delivery in 2027.
• GDS 2026 capex guidanceRMB 9.0 billionFunding sources include RMB 3-4 billion of operating cash flow, 60% bank loans at project level, and potential public REIT injections.
• VNET 2025 wholesale orders336MW, of which 70% came from AI-related demandThe company expects industry capacity growth in 2026 to be higher than last year.
• VNET 2026 delivery guidance450-500MWThe pre-commitment rate was 34.5% at the end of 2025, with a target of utilization above 80% six months later.
• VNET 2026 capex planRMB 10-12 billion70-80% can be covered by bank loans, with the remainder supported by internal funds, operating cash flow, and private REIT capital.

Impact & implications

The investment implication is that the APAC data center theme is not just an AI trade, but an infrastructure cycle driven by power, grid interconnection, data sovereignty, and long-term customer contracts. Scarce power and permitting capacity constrain supply growth, which may support rents and asset values in core markets such as Singapore; the China market depends more on the capacity reserves, financing capability, rapid delivery, and customer relationships of leading platforms. Investors should focus more on companies with platform resources, low funding costs, capital recycling capability, and clear order visibility, rather than valuing companies solely by land holdings or the number of single assets.

Risks

• Rising power and energy costs may compress margin rental returns for fixed-price customer contracts, even though most contracts can pass through costs via triple-net lease or pass-through mechanisms.
• Constraints in key equipment supply chains may affect data center construction cycles and delivery schedules.
• As campus scale expands, development, grid interconnection, cooling, and operations become more complex, increasing execution risk.
• Regulatory approval and power connection timelines remain uncertain, especially in Singapore, Japan, Korea, and some regions of China.
• Geopolitics, data sovereignty, and AI-related export or technology restrictions may act as both near-term headwinds and long-term drivers of localized infrastructure buildout.
• Interest rate and FX volatility may affect REIT financing costs, asset valuations, and distribution capacity.
• If AI demand is weaker than expected, or if AI model training/inference architectures change materially, wholesale IDC orders and capacity utilization may be affected.

What to watch

• Power approval, grid queue, and new capacity release pace in major APAC markets.
• Results of the next round of Singapore data center capacity applications, as well as SGP9 and floating data center progress.
• Regulatory approvals, 2027 deliverable capacity, and customer migration pace for GDS in western China and tier-one markets.
• VNET's execution on 2026 delivery of 450-500MW and the ramp from a 34.5% pre-commitment rate to utilization above 80%.
• Capital recycling, non-core asset disposals, sponsor pipeline injections, and potential expansion of development exposure at Keppel and Keppel DC REIT.
• The second-order impact of energy prices, interest rates, and geopolitical conflicts in the Middle East on rent negotiations, funding costs, and customer demand.
• The speed at which AI inference demand moves from an early stage to scaled deployment, and changes in hyperscalers' long-term contract tenor and pricing terms.