AI boosts Southeast Asia's digital economy: Online spending expected to rise to $368 billion this year, but growth rate slightly slows

A group of researchers said that amid rising prices and fluctuating demand, artificial intelligence is helping Southeast Asia's digital economy achieve steady growth. A report by Alphabet Inc. Class C, Temasek Holdings and Bain & Company shows that online spending in the region will grow about 17% to $368 billion this year, slightly slower than last year. Although weak economic growth and high inflation are suppressing consumer demand in categories ranging from e-commerce to travel, digital companies in the region have used AI to reach consumers more precisely and stimulate spending. This region of about 700 million people is a key battleground for e-commerce giants such as Alibaba Group Holding Limited Sponsored ADR (BABA.US) and Shopee parent Sea (SE.US) Limited, ride-hailing and food delivery companies such as Grab Holdings (GRAB.US) and GoTo Group, and online travel agencies such as Trip.com Group Ltd. Sponsored ADR Group and Traveloka. To cope with fierce competition, these companies are betting on growth in internet usage and consumer spending to drive revenue growth. However, high inflation and interest rates, as well as sharp fluctuations in energy prices caused by political shocks from GEO Group Inc, are weakening consumers' purchasing power. Concerns that any retreat in the global AI push could reduce demand for Southeast Asia's key hardware industry are also further lowering expectations for the region's economy. AI is helping digital companies partially offset such risks. The report shows that driven by expanding advertising revenue from AI-powered content recommendations, online media is expected to achieve its strongest growth in at least five years; about 62% of Southeast Asian consumers are now more confident than last year in using AI to make key decisions. AI is also driving a recovery in technology investment in the region. The report shows that in the first half of this year, financing for private companies in the region surged more than fivefold from the same period last year. Large deals to build data centers, together with demand for AI applications in industries ranging from software to digital financial services, jointly pushed up investment. Many of these deals are concentrated in companies expected to benefit from the global AI boom, such as data center operators; companies such as STT GDC and DayOne Data Centers Limited accounted for the vast majority of financing.