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The global AI boom has bolstered economic fortunes across Asia, lifting Korean chipmakers, Southeast Asian data center operators, Chinese AI startups and Japanese component-makers alike.<\/p>\n
Even the worst Middle Eastern conflict in decades isn\u2019t slowing things down. This week, Microsoft promised to invest $5.5 billion in cloud and AI infrastructure in Singapore, and an additional $1 billion into Thailand over the next few years. <\/p>\n
But the Iran war may ultimately force Asia to revisit its AI playbook, following a surge in energy prices and shortages of the key inputs needed to build AI infrastructure.<\/p>\n
\u201cThe scaling laws that have driven the AI boom are fundamentally peacetime constructs, which were discovered in an era of abundant energy and expanding chip supply, and operate on an implicit assumption: that energy elasticity is unbounded,\u201d Wei Lu, a professor at the College of Computing and Data Science at Singapore\u2019s Nanyang Technological University (NTU), explains. That\u2019s led to what he deems a \u201cbrute force aesthetic,\u201d where larger and more capable models are developed even as the energy per unit of compute keeps rising.<\/p>\n
That\u2019s tolerable when times are good; it\u2019s less so when supplies are constrained. \u201cThe current conflict is repricing that bet,\u201d Lu says.<\/p>\n
Asia\u2019s AI boom<\/p>\n
Asia has become the center of the world AI boom, with Nomura estimating that the region contributed nearly two-thirds of global AI trade growth in the first half of 2025.\u00a0<\/p>\n
Different regions have specialized in different parts of the AI trade. East Asian economies like South Korea and Taiwan have won big due to their semiconductor manufacturing, supplying the AI capital expenditure boom in markets like the U.S. In Southeast Asia, investment has focused more on assembly, precision manufacturing, and data storage.\u00a0<\/p>\n
But with oil, LNG, and helium prices surging in the wake of the Iran war, experts warn the region\u2019s AI operations could grow more costly.\u00a0<\/p>\n
\u201cThe main impact on Asia\u2019s AI boom would be higher costs for AI infrastructure development,\u201d says Bo An, a computer science professor from NTU. \u201cChipmakers may face higher energy, raw material, shipping and insurance costs. Data center operators could face higher power and cooling costs.\u201d<\/p>\n
He also predicts that higher costs and supply disruptions in Asia will inevitably spill over to tech firms elsewhere, given the region\u2019s central role in the global chip supply chain.\u00a0<\/p>\n
TSMC, for example, is the lead supplier of advanced chips to giants like Nvidia and Apple. Yet TSMC\u2019s base of Taiwan relies on imported energy for much of its power supply, potentially setting up a difficult choice for the island\u2019s government if the Iran crisis continues. Oxford Economics estimates that Taiwan\u2019s industrial production might fall by 0.7% below the baseline if shortages persist for six months.\u00a0<\/p>\n
\u201cWe are already seeing panic procurement and logistics paralysis,\u201d says Lu of NTU, noting that the global supply chain is now \u201ca series of single points of failure.\u201d<\/p>\n
Efficiency-first design<\/p>\n
In the short term, the AI trade is strong enough to overcome worries over the Iran conflict. South Korea\u2019s chip exports hit a record high of $32.8 billion in March, jumping more than 150% year-on-year, according to government data released on April 1.\u00a0<\/p>\n
\u201cWe do not expect the energy shock to materially derail South Korea\u2019s AI\u2011led growth trajectory this year, particularly as the current [semiconductor] cycle appears stronger than previously anticipated,\u201d noted Bank of America\u2019s analysts in an April 2 research note.\u00a0<\/p>\n
There may even be an upside for Asia in the long-term. Iran has attacked data centers in the Middle East, highlighting how server racks are now possible military targets.\u00a0<\/p>\n
After investing heavily in the Middle East, \u201cAI companies are starting to look at Southeast Asia and India,\u201d Sandeep Sethi, who oversees the APAC data center business for real estate company JLL, tells Fortune.\u00a0<\/p>\n
But when it comes to East Asia, data center operators may face the longer-term challenge of limited power availability, especially in places like Japan, where it can take up to 10 years to connect a new data center to the grid.\u00a0<\/p>\n
Lu argues that AI businesses need to start pursuing \u201cefficiency-first\u201d design, reducing the energy and raw materials needed to foster artificial intelligence.\u00a0<\/p>\n
\u201cThe most valuable form of intelligence is the kind that knows how to do more with less.\u201d<\/p>\n
#Iran #war #energy #shock #force #Asia #revisit #playbook<\/p>\n","protected":false},"excerpt":{"rendered":"
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