Even the worst Middle Eastern conflict in decades is not slowing things down, as Microsoft promised to invest US$5.5 billion in cloud and AI infrastructure in Singapore, and an additional $1 billion into Thailand over the next few years, according to U.S. magazine Fortune.

A programmer works on a computer. Photo by Unsplash/Ajay Gorecha

In Southeast Asia, investment has focused more on assembly, precision manufacturing, and data storage. This provides a solid foundation for attracting further investment as global technology firms seek alternative locations.

However, the Middle East conflict is exerting mounting pressure. Higher energy and raw material prices are driving up the cost of AI infrastructure development, from chip production to data center operations. Experts warn that higher expenses for power, cooling, shipping, and insurance could disrupt supply chains that are heavily reliant on Asia.

In the short term, the AI trade is strong enough to overcome worries over the Iran conflict. South Korea's chip exports hit a record high of $32.8 billion in March, jumping more than 150% year on year, Fortune magazine cited government data released on April 1.

Over the longer term, however, the conflict is reshaping how AI development is approached. Growth models based on assumptions of abundant and inexpensive energy are being challenged, prompting companies to optimize energy and resource use.

After investing heavily in the Middle East, AI companies are starting to look at Southeast Asia and India. This shift presents significant opportunities for regional economies to draw investment into data infrastructure and AI-related industries.

But when it comes to East Asia, data center operators may face the longer-term challenge of limited power availability. AI businesses need to start pursuing "efficiency-first" design, reducing the energy and raw materials needed to foster artificial intelligence.

Overall, despite cost pressures and supply chain risks, Southeast Asian countries are well positioned to deepen their participation in the global AI value chain as the industry gradually pivots toward more sustainability and efficiency.