(Bloomberg) — Stock investors are scouring Southeast Asia for alternatives to play on the artificial intelligence theme as tech giants invest billions of dollars in infrastructure over the coming years.
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Power producers are becoming favorites as more data centers are installed in the region, thanks to falling energy and land costs, analysts say. Companies in the IT services, telecommunications and semiconductor industries are also well-positioned to benefit.
“Utility companies and those that provide electrification and networks are much more interesting to us,” said Kenneth Tang, portfolio manager at Nikko Asset Management.
Southeast Asia’s relatively low cost of production and strong position in the global semiconductor value chain are boosting the region’s appeal as the next data center hub. This is a turnaround for the region once shunned by investors due to its lack of technological exposure.
Although AI’s contribution to earnings remains to be seen given that the technology is in its infancy, the upside potential is huge, analysts say. The region is poised to become the world’s second-largest non-U.S. data center provider behind China by 2027, according to Morgan Stanley, setting the stage for a multi-year growth cycle for supply chain companies.
Here’s a list of several Southeast Asian stocks that analysts say are best positioned to benefit from the AI boom.
YTL Power
Shares of Malaysian utility company YTL Power International Bhd. have doubled since it signed a deal with Nvidia Corp. to build a $4.3 billion AI data center in the state of Johor.
As the only new data center operator in the Southeast Asian country with 500 MW of captive solar power, the company “is expected to stand out among customers who want clean energy and fast capacity ” Macquarie Group Ltd. analysts, including Charles Yonts, wrote in a note. last month.
Tenaga National
Tenaga Nasional Bhd., Malaysia’s sole network operator, will be “the biggest beneficiary of Asia’s data center growth,” Morgan Stanley analysts including Mayank Maheshwari wrote in a note dated May 15. three years, they said.
The company expects data center electricity demand to exceed 4,300 MW by 2035. Tenaga’s push toward renewable capacities will also add to its attractiveness. The stock has jumped 32% so far this year.
Delta Electronics
Delta Electronics Thailand PCL, a leading supplier of power modules for data centers and electric vehicles, “is one of the main beneficiaries of the upcoming AI data center being built in ASEAN, counts kept up with customer demands for supply chain resilience” and cooling solutions, said Wern Juan Chng, a technology analyst at HSBC Holdings Plc.
In March, the company expanded its electronics manufacturing capacity and built new factories to produce components for the automotive, cloud computing, data center and AI segments. While this may contribute to earnings growth, the stock is lagging the Thai equity benchmark, suggesting there is room to catch up.
Gulf Energy
Thailand’s Gulf Energy Development PCL is another power producer expected to benefit from growing electricity demand and expanding data center infrastructure. The company “is well established in the energy and infrastructure sector, with a portfolio of green energy projects in domestic and international markets and an extensive sales network,” Morgan Stanley analysts said.
Gulf is looking to increase its data center capacity, with the first phase expected to be completed in March next year. It also partners with Singapore Telecommunications Ltd. to attract more hyperscalers.
FPT
Shares of FPT Corp., Vietnam’s largest listed technology company, are up nearly 40% this year, driven in part by optimism over its partnership with Nvidia. The software and telecommunications company is expected to post earnings growth of more than 20% over the next two to three years, according to Ruchir Desai, fund manager at Asia Frontier Capital Ltd.
Efforts to deepen strategic ties between Vietnam and the United States will also help support the Southeast Asian country’s advancement in the technology industry value chain, which bodes well for FPT .
–With help from Ishika Mookerjee.
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