Asia is becoming a self-supporting AI ecosystem. Western firms are missing out

THE artificial intelligence race – considered in totality as frontier models backed by infrastructure – is often framed as America’s to lose.

But Asian markets are converging on capital, physical manufacturing, power and compute in ways that give the region a genuine, standalone ecosystem claim on the AI economy.

That shifts the calculus for Western corporates used to buying mature firms with sustainable growth, rather than backing startups early, and changes the parameters of the AI competition.

Capital is moving in Asia’s favour

A telling statistic: less than 20 per cent of large venture-backed exits in Asia went to a Western buyer, and Western acquisitions of Asian venture-funded businesses valued above US$100 million fell 65 per cent between 2024 and 2025.

That is not a market that is slowing down. The overall volume of Asia-Pacific mergers and acquisitions rose 33 per cent year on year to cross US$1 trillion in 2025, according to Mergermarket, a market intelligence firm. 

Meanwhile, PwC puts China’s total deal value above US$400 billion for the year, up 47 per cent, driven by domestic strategic investment.

The deals filling the gap left by Western buyers are increasingly AI-driven.

AI now features in the strategic rationale for roughly a third of the region’s largest transactions, concentrated in the sectors closest to the AI buildout: technology, manufacturing, utilities and power.

That’s because Asia has a genuine energy advantage over other regions.

China’s power consumption passed 10 trillion kilowatt-hours for the first time in 2025, and its wind and solar capacity reached 1,760 gigawatts (GW) by November, up 34 per cent year on year, with new ultra-high-voltage transmission lines lifting cross-provincial capacity to 370 GW.

India is on a similar trajectory, with renewable generation up almost 24 per cent year on year in 2025. New Delhi is also targeting 500 GW of non-fossil energy capacity by 2030.

Power was always going to decide who can build AI at scale, and Asia is adding it faster than most Western markets can permit.

The share of regional venture deals going to AI-focused companies has climbed just as sharply. More than half of the deals in Singapore, Australia and New Zealand today are directed to AI, up from under a third five years ago. India is close behind at nearly 40 per cent. 

Domestic acquirers are not filling a vacuum so much as outbidding for AI-relevant assets before Western buyers arrive. That is pushing the latter towards earlier, minority investment rather than waiting to acquire at maturity.

The contest is also moving into hardware, where China’s overbuilt electric-vehicle manufacturing base is becoming the launch pad for humanoid robotics.

The same actuators, motors and battery packs that made China the world’s largest car manufacturer are being redirected into robot production.

The country now controls 63 per cent of the key companies in the global supply chain for humanoid robot components. Close to 90 per cent of humanoid robots sold globally in 2025 were made there. 

This is the convergence of the physical world and AI that Western firms have been slow to price in.

Partnerships as Asia’s differentiator

Even as acquisition of AI firms within Asia speeds up, partnerships still beat dealmaking. Compute is the clearest illustration of that. 

Global neocloud revenue is expected to expand from more than US$25 billion in 2025 to nearly US$400 billion in 2031. Notably, neocloud infrastructure is not bound by geography, and the Asia-Pacific is the fastest-growing region in that market.

Singapore already anchors the region’s core AI training and low-latency compute, while Malaysia and Indonesia absorb higher-latency capacity, forming a cross-border compute corridor no single market could build alone.

Local relationships are the real magic in all of this: partnership, not capital alone, is what unlocks the infrastructure. It is what could bring the cost per token down significantly further for anyone willing to build those relationships properly.

None of this points to Western retreat. It points to Asia becoming a true self-supporting AI ecosystem.

The firms that build capability here early, and treat partnership as the strategy rather than the fallback, will be the ones that define this decade of AI in Asia. Time will tell how much of that future needs Western capital, if at all.

The writer is global head of innovation banking at HSBC