(Oct 21): Artificial intelligence (AI) is helping Southeast Asia’s digital economy deliver robust growth in the face of rising prices and teetering demand, according to a group of researchers.

Online spending across the region will rise about 17% this year to US$368 billion (RM1.5 trillion), a report from Google, Temasek Holdings Pte Ltd and Bain & Co showed, a slight slowdown from a year earlier. While sputtering economic growth and elevated inflation are weighing on consumer demand in categories from e-commerce to travel, the region’s digital businesses have harnessed AI to better target consumers and spur spending.

The region of about 700 million people is a battleground for e-commerce giants such as Alibaba Group Holding Ltd and Shopee parent Sea Ltd, ride-hailing and food-delivery firms including Grab Holdings Ltd and GoTo Group, and online travel agencies like Trip.com Group Ltd and Traveloka. To cope with the intense competition, the companies are betting on rising internet use and consumer spending to fuel their revenue growth.

Still, elevated inflation and interest rates, as well as jolts to energy prices from geopolitical shocks, are weighing on consumers’ spending power. Concerns that any retreat in the world’s AI push could reduce demand at Southeast Asia’s crucial hardware industry are further tapering expectations for the regional economy.

AI is helping digital businesses partially offset such risks. Online media is on track to grow at its strongest pace in at least five years, helped by swelling advertising revenue from AI promoting content, according to the report. About 62% of Southeast Asian consumers are now more confident using AI to make critical decisions than they were last year, the report showed.

AI is also fuelling the region’s tech investment rebound. Funding for the region’s private companies surged more than fivefold in the first half of this year compared with the same period last year, according to the report. Major deals to construct data centers spurred investments, along with demand to apply AI in industries from software to digital financial services.

Many of the deals concentrated on companies that stand to gain from the global AI boom, such as data centre operators. Among them, firms including STT GDC and DayOne Data Centers Ltd accounted for a bulk of the funding.

Uploaded by Liza Shireen Koshy