Unique Research · Market · December 20, 2024
Southeast Asia is rising fast as an investment hotspot for AI leaders such as Nvidia and Microsoft, pouring capital into cloud and data centers. Young local tech firms are largely missing the wave.
With a young population hungry for video streaming, online shopping, and generative AI, global giants may spend up to $60 billion in the region in coming years. Very little of that reaches AI-core local startups. Investors stay cautious on unproven names, and the region has yet to show it can mint scaled innovators.
Preqin: year-to-date VC into young SEA AI firms is only $1.7 billion vs ~$20 billion for Asia-Pacific overall. In 2024 SEA saw just 122 AI financing deals vs 1,845 across APAC.
That gap raises questions about whether an emerging region can build a private sector that competes with the U.S. and China. VC skepticism on SEA AI weighs on the whole local tech growth story.
Globally, capital chases AI — but mostly in the U.S. and China. Preqin: U.S. AI financing $68.5B in 2024; China ~$11B.
Assets — and fragmentation
On paper SEA’s 675 million people look ready: Access Partnership counts 2,000+ AI startups — more than South Korea, roughly level with Japan and Germany. Singapore ranks #3 on a global AI index (including AI scientists per million people).
But the wider region — Philippines, Indonesia, Thailand, Malaysia — differs culturally and economically, so products and services scale slowly. The long investor question: can local tech win profitably on a global stage?
Antler co-founder and managing partner Yossi Sallaovara: “Diversity in language, culture, and infrastructure makes building large, unified datasets harder — and AI solutions traditionally need those to scale.”
East Ventures partner Sang Han: investors watch foundation models, the software engineering to train/refine them, and the hardware underneath — “None of that is happening at scale in Southeast Asia.”
Exits and policy
The whole SEA VC industry also faces weak IPO exits — Silicon Valley’s private-capital model is hard to transplant. Google, Temasek, and Bain: private financing for SEA firms is heading toward historic lows vs pandemic peaks as investors get pickier and capital more expensive.
Governments are not idle — most have national AI frameworks; Singapore funds industry startups via its investment arms. Alta co-founder Kevin Lee wants more coordinated regional plans: agendas diverge — some push high-tech, others infrastructure and living standards — so breakthrough innovation rarely becomes a regional priority.
Where opportunity sits
Despite a stumbling AI industry, Google–Temasek–Bain still see double-digit growth in SEA’s broader digital economy (revenue and profit). A rising middle class, incomes, and mobile/internet users — plus relative insulation from U.S.–China geopolitical risk — keep potential alive.
Qualgro partner Weisheng Neo: SEA AI opportunity may sit early in the value chain — collecting and organizing big data as a core asset for competitive edge.
Some winners already: Singapore’s Patsnap collects, cleans, and structures data that becomes model fuel — patents, chemicals, drugs, food databases over 17 years; customers include NASA, Tesla, Disney. SoftBank-backed, it now trains industry LLMs and adds NLP tools.
Indonesia’s Alpha JWC, with Pijar Foundation, built a sandbox linking talent and early AI startups to large Indonesian enterprises. Partner Jefrey Joe: “We see more clearly the pain points large firms face embedding AI into workflows — and the talent available to solve them.”
Such efforts fuel optimism that the AI wave can still be caught — but Joe says it needs the whole ecosystem: “Capital is only part of it. Regulators, government, buyers, suppliers, and consumers have to work together.”
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