Singapore: Private funding in Southeast Asia’s digital economy continues to trail behind global levels, despite a moderate recovery from the recent funding slowdown, according to a new report by Google, Temasek Holdings, and Bain & Company.

The report found that private investment in the region’s digital economy reached 7.7 billion dollars in the 12 months up to June 2025, marking a 15 percent increase from the previous year. However, this growth remains lower than the global average of about 25 percent, showing that the region still faces challenges in attracting investors at the same pace as other markets.

The total investment level remains about 70 percent below the record high of 27 billion dollars reached in 2021, when global technology funding surged during the pandemic. Analysts say the current slowdown reflects tighter global capital conditions and cautious investor sentiment.

Most of the recent funding went into late-stage ventures, with early-stage investments dropping from around 30 percent to 20 percent of the total. Experts warn that this decline could make it harder for new startups to emerge in the coming years.

Despite the slowdown, artificial intelligence remains a bright spot for the region. About 32 percent of total private funding in the first half of 2025 went to AI-related businesses, compared to 30 percent a year earlier. Around 680 AI startups raised more than 2.3 billion dollars during the period, with Singapore hosting the majority of them.

The report also highlighted the rapid expansion of data center capacity in Southeast Asia, which is expected to grow nearly threefold in the coming years. Malaysia leads this trend, accounting for more than half of the 4,600 megawatts of planned new capacity across the region.

Experts say that while AI and data center projects show strong potential, the region must address several long-term challenges, including access to early-stage capital, infrastructure limits, and digital inclusion. Policymakers are being urged to create a more supportive environment for young tech companies and to ensure that the benefits of digital growth reach smaller businesses and underserved communities.

Analysts believe Southeast Asia still has significant room to grow, especially as global investors look for emerging markets with strong digital potential. However, the region’s ability to attract sustained investment will depend on improving investor confidence, regulatory clarity, and continued innovation across its economies.