Southeast Asia's digital economy has entered a new phase. According to the latest e-Conomy SEA 2025 report by Google, Temasek and Bain & Company, the region's online economy is set to exceed US$300 billion ($390.8 billion) in gross merchandise value (GMV) this year, over seven times larger than in 2016. The next leap forward hinges on artificial intelligence (AI) and the infrastructure to support it.
The report notes that Southeast Asia is now the world's most "AI-curious" region, with search interest three times the global average. Five Asean markets – namely Brunei Darussalam, Indonesia, the Philippines, Malaysia and Singapore – rank among the top 20 worldwide for engagement with multimodal AI tools.
That curiosity is turning into measurable gains. About 75% of consumers say that AI tools, such as chatbots, translators, and image search, have made their daily tasks easier, while 50% say these tools help them make decisions faster. Among investors, 86% report cost savings and 71% report higher revenue growth in portfolio companies using AI.
In e-commerce, AI-assisted recommendations influence 62% of purchases. Together with creator-driven video commerce, this has increased transaction volumes by 50% year-over-year, even as average order values decline.
"AI integration and intelligent adaptation are really no longer future concepts. They're a real present-day competitive advantage," says Sapna Chadha, vice president for Southeast Asia and South Asia Frontier at Google. She gave the example of Grab's deployment of an AI driver companion for its 250,000 drivers, which has led to daily earnings improving by 10 to 20%. "You see this human and AI partnership that's coming together from an operational lens."
Building the power behind AI
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Data centre operators across the Asean-10 have announced 4,620 megawatts (MW) of new capacity, a 2.8-fold increase that outpaces the Asia Pacific average of 2.2 times growth and roughly 20 times Singapore's current peak draw from its largest facilities. Malaysia's Johor, Indonesia's Batam and Thailand's Eastern Economic Corridor are developing into cross-border clusters linked by high-speed fibre and supported by cleaner-energy pipelines.
The region’s AI buildout is also being driven by regulatory and operational realities. As countries tighten data localisation and digital sovereignty rules, demand for in-market storage and compute capacity is accelerating.
"There's a local pull, from a data localisation perspective, that's creating urgent [demand for local data centres in markets like] Thailand and Indonesia," says Chadha. "On the hardware side, 5G is expanding. Also, the grid has become more reliable in the region, creating the right and necessary conditions for growth."
See also: Grab tests lane-level GPS in Singapore to sharpen driver navigation
Global cloud providers and investors are following the demand. Hyperscalers are doubling regional builds, while private-equity firms that once backed food delivery start-ups are now financing liquid-cooled server farms and energy-efficient colocation hubs.
Florian Hoppe, partner at Bain & Company, notes the risks if the region fails to develop beyond infrastructure. "One of the risks we're seeing is that this can't become a region of warehouses and data centres. We need to have economic centres of gravity. We need to have regional champions in this part of the world who are successful in Asean and then also beyond Asean over time."
Capital markets reawaken
The AI and data centre boom is now reshaping where capital flows. The report identifies 680 AI start-ups in the region that have attracted over US$2.3 billion in funding, or about 30% of all private capital raised last year. Private funding across digital sectors climbed 15% to US$7.7 billion in the past 12 months, led by late-stage deals in digital financial services and AI-related ventures.
Singapore remains the hub, but Malaysia, Vietnam, and Indonesia are seeing new activity as hyperscalers, telcos, and governments invest in AI-ready data parks and sovereign cloud projects.
Around 80% of venture portfolios are now profitable or expected to break even within a year, a sharp reversal from the loss-making environment of 2021-2022. The survivors are now positioned to capture the AI wave with stronger balance sheets and clearer paths to scale.
On competitive positioning, Hoppe notes that Southeast Asian start-ups face challenges competing at the infrastructure and chip level, where global players dominate. “Where Southeast Asian start-ups have a much stronger role to play is anything that is more on the application layer,” he explains. The region’s tech-forward consumer base and fragmented markets are natural drivers of innovation, with competitiveness shaped by the need to scale across 10 diverse markets and dozens of languages.
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That focus on applied innovation is now drawing the attention of long-term investors. "Companies are not only able to increase productivity but also accelerate revenue growth by embedding AI into their products. For investors, this marks a generational opportunity. AI is not just another technology wave. It will transform how businesses operate and thrive,” says Fock Wai Hoong, head of Southeast Asia at Temasek.
He also shares that among the surveyed investors, 86% report cost savings and 71% report higher revenue growth in portfolio companies using AI. "Both top line and bottom line are moving at the same time," he says.
Yet, the long-term value of AI will depend on how well the ecosystem matures beyond funding and profitability.
Hoppe cautions that growth will bring workforce challenges. “About 30 million jobs depend directly on the digital economy in Asean, and the rise of AI poses challenges around physical embodiment (such as autonomous vehicles and potentially robotics) but also the impact on white-collar jobs. This needs to be managed carefully.”
Fock adds: "Realising this potential will take more than capital. It will demand partnership between investors, policymakers and business leaders to build infrastructure, cultivate talent, share data, and above all, build trust. Governance breeds trust, and trust is essential to drive continued positive investor engagement and growth."
