Southeast Asia is becoming a prime destination for AI investment, with global giants like Nvidia and Microsoft pouring billions into cloud services and data centers. Yet, according to Fortune, the region’s own AI startups are missing out on this boom, raising concerns about their ability to compete on a global scale.
While global companies plan to invest up to $60 billion in the region over the next few years, local startups have secured a mere $1.7 billion in AI venture funding this year—less than 9% of the Asia-Pacific total. Southeast Asia’s diversity in culture, language, and infrastructure poses significant challenges for scaling AI products, leaving investors hesitant to back unproven firms.
Globally, AI funding is heavily concentrated in the U.S. ($68.5 billion) and China ($11 billion) in 2024, according to Preqin data. Despite Southeast Asia’s population of 675 million and over 2,000 AI startups, its fragmented markets make it difficult for companies to create unified datasets essential for scaling AI solutions.
Local governments have taken steps to foster AI innovation, with Singapore leading the charge by funding startups through its investment vehicles. Yet, a broader regional strategy is lacking. “Countries in Southeast Asia are focused on vastly different agendas,” said Kelvin Lee, co-founder of investment platform Alta. “This divergence makes it hard to prioritize moonshot innovation on a regional scale.”
Despite the challenges, success stories offer a glimpse of potential. Singapore-based Patsnap has built large datasets over 17 years, spanning patents, chemicals, and drugs. These datasets now power its sector-specific AI tools used by major clients like NASA and Disney.
Similarly, Indonesia’s Alpha JWC is creating a talent sandbox to connect AI startups with corporations, addressing real-world pain points and fostering innovation.
Experts believe Southeast Asia’s AI opportunity lies in the early stages of the value chain, such as big data collection and organization. “Building core assets like structured datasets can give the region a competitive edge,” said Weisheng Neo, a partner at Qualgro.
With a growing middle class, expanding digital economy, and insulation from U.S.-China geopolitical tensions, Southeast Asia’s AI future is still bright. However, more collaboration among governments, regulators, and industry players is critical for the region to fully capitalize on its AI potential.
Photo: thanyapatm
