Southeast Asia is rapidly positioning itself as an investment hotspot for AI giants like Nvidia and Microsoft, which are channeling billions into cloud services and data centers. However, the region’s young tech companies are struggling to harness this boom.
While global corporations plan to invest up to $60 billion in Southeast Asia, fueled by the region’s embrace of video streaming, online shopping, and generative AI, much of this capital bypasses local startups focused on artificial intelligence. Investors remain cautious about betting on unproven entities, and Southeast Asia has yet to establish itself as a hub for scalable, innovative AI firms.
So far in 2024, venture capital funding for Southeast Asia’s AI startups has amounted to just $1.7 billion—less than 9% of the $20 billion invested across the Asia-Pacific region, according to Preqin. Only 122 AI-related funding deals have been recorded in Southeast Asia, compared to 1,845 across the broader APAC region.
Challenges in Scaling AI Innovation
This funding gap underscores doubts about Southeast Asia’s ability to compete with AI leaders like the US and China. In 2024, the US attracted $68.5 billion in AI investments, while China secured $11 billion. Although Southeast Asia boasts over 2,000 AI startups—more than South Korea and nearing Japan’s numbers—the region’s cultural and economic diversity complicates efforts to scale innovations effectively.
“Southeast Asia’s diversity in language, culture, and infrastructure makes it challenging to create large, unified datasets, which are critical for scaling AI solutions,” said Jussi Salovaara, managing partner at Singapore-based VC firm Antler.
Additionally, the region lacks the infrastructure to support large-scale development of foundational AI models, hardware, and software engineering. This limitation deters investors seeking to capitalize on cutting-edge AI opportunities, according to Sang Han, a partner at East Ventures.
Structural and Financial Hurdles
The broader venture capital ecosystem in Southeast Asia faces significant challenges. Weak IPO markets and limited exit opportunities have stymied the region’s ability to replicate Silicon Valley’s private capital model. Research by Google, Temasek Holdings, and Bain & Company shows private funding in Southeast Asia is poised to hit record lows, as investors grow more selective and cautious amid rising costs.
Governments in the region have recognized the need for intervention. National AI frameworks are in place across the board, with Singapore leading efforts by providing funding to startups through state-backed investment vehicles. However, a lack of regional coordination hinders progress.
“Countries in Southeast Asia prioritize vastly different agendas—some focus on high-tech sectors, while others work to improve basic infrastructure,” said Kelvin Lee, co-founder of investment platform Alta. “This divergence makes it difficult to foster moonshot innovation on a regional scale.”
Opportunities for Growth
Despite these hurdles, Southeast Asia remains a region of untapped potential. Its digital economy continues to grow at double-digit rates in both revenue and profitability, driven by a rising middle class, increasing mobile and internet penetration, and relative insulation from US-China geopolitical tensions.
Experts see promise in early-stage AI opportunities, such as the collection and organization of big data. “Building core assets through big data management can create a competitive advantage for the region,” said Weisheng Neo, a partner at venture capital firm Qualgro.
Some success stories underscore this approach. Singapore-based Patsnap has spent nearly two decades amassing and organizing data for use in AI models, enabling clients like NASA, Tesla, and Disney to leverage its resources. The company now uses its datasets to develop sector-specific AI tools, including natural language processing.
Similarly, Indonesia’s Alpha JWC has collaborated with the Pijar Foundation to establish a sandbox that connects AI startups with large corporations, providing insights into real-world challenges and fostering talent development.
Collaboration as the Key to Progress
For Southeast Asia to capitalize on the AI boom, greater collaboration among stakeholders is essential. This includes governments, regulators, corporations, and consumers working together to build a robust ecosystem.
“Capital alone is not enough,” said Jefrey Joe, partner at Alpha JWC. “Success depends on fostering a cohesive ecosystem where every stakeholder plays a role.”
While challenges remain, the optimism within Southeast Asia’s startup ecosystem suggests there is still time to ride the AI wave—provided the region can bridge its gaps and harness its untapped potential.
Science4 weeks ago
Technology3 weeks ago
Science3 weeks ago
Business2 weeks ago
Sports2 weeks ago
Business2 weeks ago
Lifestyle2 weeks ago
Health2 weeks ago