In a stretch of southern Malaysia that was once dotted with palm and pineapple plantations, signs of China's global technology ambitions are emerging.
More than 15 cranes stand on about 40 hectares of excavated land where DayOne is building a massive complex, a company whose corporate roots can be traced to one of China's largest data center operators. Not far away, at the edge of a dense tropical forest, hundreds of workers were completing another facility expected to serve Chinese technology companies.
Some of the world's most advanced artificial intelligence chips will be deployed in these data centers. Under U.S. export controls, these semiconductors, made by Nvidia, are essentially prohibited from being shipped to China. But those restrictions generally don’t stop Chinese companies like ByteDance, DayOne’s largest customer, from getting the same chips from data centers outside China.
It’s this policy disparity that has propelled Malaysia, a country of 35 million people, into an unexpected frontier in the artificial intelligence boom. Tech companies are pouring billions of dollars into the country, attracted by cheap land and power and its proximity to undersea internet cables to China and the rest of the world.
The artificial intelligence industry is increasingly divided between China and the United States along geopolitical lines, and Malaysia occupies an unusual position in it: rather than taking sides, it has opened its doors to both sides.
The surge has reshaped Malaysia's economy and landscape, raised concerns about tight electricity and water supplies, and drawn scrutiny from U.S. officials concerned about China's access to advanced artificial intelligence chips.
The transformation is most dramatic in Johor, the southern Malaysian state at the center of a construction boom. There are 65 data center projects across the state currently operating, under construction, or in various stages of planning and approval.
These facilities already consume more than 2 gigawatts of electricity, enough to supply more than one-third of Malaysian households. According to state agency Invest Johor, if all planned projects are completed, demand could exceed 10 gigawatts, making it one of the largest concentrations of computing power in the world. Chinese and Western technology companies are expected to each account for about half of the capacity.
“This is really unbelievable, beyond imagination,” said Steven Tan, chief executive of Pro3c, a Taiwanese company that makes optical components for Nvidia chips. “Everyone is here.”
U.S. tech giants including Microsoft, Google and Oracle are investing heavily in Malaysia to get closer to Asian customers. Meanwhile, Malaysia has become an offshore computing hub for Chinese companies such as ByteDance, Tencent and Alibaba. In some industrial parks in Johor, infrastructure serving American and Chinese companies is being built almost side by side.
“This is the only place in the world where we are seeing this right now,” said Lee Teng Han, a Johor state government official involved in data center approvals. “What makes Malaysia special in this current wave of artificial intelligence is our non-aligned neutral status.”
China boom
This boom in Malaysia will start around 2021. After neighboring Singapore banned new data centers due to power constraints, companies quickly began to move to the other side of the border.
Gary Goh, who runs a Malaysian data center consultancy, recalls looking for land in Johor close to transmission lines to get the power he needed. “There’s a ‘K-Pop witch hunter’ group — I’m the power line hunter,” he said.
Chinese companies arrived first, including what would become DayOne. Originally an international subsidiary of GDS Holdings, one of China's largest data center developers, it announced its first facility in Johor in 2021 to help Chinese customers expand overseas.
The company changed its name to DayOne in 2025 and is now one of the largest data center developers in Malaysia. At a location in Johor, DayOne purchased an 18-hole golf course for new facilities.
Its expansion coincides with rising tensions between Washington and Beijing. In 2022, the U.S. government implemented export controls to prevent Nvidia from selling its most advanced chips directly to China in an attempt to slow down China's artificial intelligence development.
Singapore-based DayOne shows how Chinese companies are retaining a foothold in the artificial intelligence data center boom despite U.S. restrictions. It has raised billions of dollars from international investors, including U.S. investment firm Coatue Management and Japan's SoftBank, and recently announced plans for an initial public offering.
But DayOne maintains strong ties with China's technology industry. GDS remains a major investor, alongside Singapore-based Hillhouse Ventures, founded by Chinese billionaire Zhang Lei. Jamie Khoo, former chief operating officer of GDS, now runs DayOne, and Huang Wei, chairman of GDS, serves on its board of directors.
Analysts say TikTok’s Chinese parent company ByteDance is DayOne’s largest customer. In a recent securities filing, DayOne said an unnamed customer operating a "leading short video" service accounted for nearly 70% of its revenue in the first half of 2026.
ByteDance did not respond to a request for comment.
In April, DayOne joined Nvidia's data center partner network, which helps develop facilities to handle the most advanced artificial intelligence computing equipment.
Nvidia said remote access to computing power hosted abroad complies with U.S. export controls because the chips remain outside of restricted countries. The business "advances U.S. national security and brings tens of billions of dollars and good-paying jobs back home," the company said in a statement.
US ban
U.S. officials have taken note of Southeast Asia's role as a hub for offshore data centers.
A report circulating within U.S. government agencies determined that 38 of 128 data center projects in Southeast Asia have direct or indirect Chinese ownership. The report estimates that the computing power available to Chinese companies through Malaysia, Thailand, Vietnam, Indonesia, and Singapore is almost equal to the entire computing power of mainland China subject to U.S. export restrictions. The report was shared with The New York Times.
In July, Michael Kratzios, a White House adviser involved in artificial intelligence policy, accused the Chinese company Dark Side of the Moon of using high-end chips from data centers in Thailand to train its models.
