Southeast Asian digital economies are projected to expand to $263 billion in gross merchandise value (GMV) this year, driven by the growth of artificial intelligence (AI) and increasing user sophistication, according to the latest e-Conomy SEA report. The study, jointly released by Temasek, Google, and Bain & Company, taps into insights from various sources and covers six Southeast Asian markets.

The report highlights the potential of AI to fuel further growth in the region’s digital economy. Southeast Asia has witnessed a significant increase in AI infrastructure investment, with $30 billion invested in the first half of 2024. This surge in investment is driven by consumer interest in AI applications and the region’s favorable market conditions, including a young and growing population, high digital literacy, and smartphone penetration.

The study also emphasizes the importance of cybersecurity in sustaining the region’s digital economies. As cybercrimes continue to pose threats, collective efforts are needed to build digital trust and enhance cybersecurity measures. AI is seen as a crucial tool in mitigating risks and helping organizations stay ahead of cyberattacks.

The report projects that profitability in the region’s digital economy will reach $11 billion in 2024, with revenues expected to climb to $89 billion. The growth is attributed to factors such as deeper participation among digital consumers, effective monetization strategies, and new revenue streams like advertising.

To fully harness the potential of AI, businesses are advised to align AI initiatives with core objectives and invest in foundational elements. This includes building AI talent and scalable infrastructure to drive sustained growth.

In response to the growing demand for AI-ready infrastructure, Southeast Asian markets are accelerating investments in data centers. Malaysia, Singapore, and Thailand have committed billions of dollars to expand their data center capacities, recognizing the importance of supporting the region’s digital transformation.

While consumers in the region show more interest in the benefits of AI, efforts to address concerns related to AI-associated risks are also necessary. The report highlights the need for businesses to unlock greater business value from AI and advance beyond experimentation.