Asia-Pacific’s growing dependence on artificial intelligence-related industries is exposing the region to economic risks as energy costs rise, domestic demand weakens and investors question the sustainability of AI investments, Moody’s Analytics said in a report published Oct. 26, 2026.
In its Asia-Pacific Outlook: AI Caramba! commentary, authored by John Bromhead, Moody’s said semiconductor exports remain strong, particularly in South Korea and Taiwan, but the region’s economic resilience is increasingly dependent on a narrow group of technology-related industries.
“AI is the region’s biggest growth engine and its largest macro vulnerability,” the report said.
Moody’s expects Asia-Pacific gross domestic product growth to slow from 4.4% in 2025 to 4.3% in 2026 and 3.7% in 2027, as higher energy prices and tighter monetary policies weigh on household spending and business investment.
The report said the region’s export performance was masking weaker domestic economic conditions.
“Domestic demand is stubbornly weak, lagging pre-pandemic trends and global peers, while rising energy and food costs are squeezing purchasing power,” it said.
South Korea’s exports during the first 20 days of October surged 105% year over year, with semiconductor shipments increasing 223%. After adjusting for working days, total exports rose 66%.
Taiwan recorded a 60.9% year-over-year increase in September exports, helping it post another record quarter.
Inflation pressures central banks
Higher energy costs are feeding into inflation, business expenses and government spending, prompting central banks across the region to prioritize price and currency stability.
Australia, Japan, Hong Kong, the Philippines, South Korea and Indonesia have raised interest rates in recent months, according to Moody’s.
The report said further monetary tightening could follow as inflation pressures persist. Its policy pressure index indicates that readings above 0.5 are associated with an approximately 50% probability of an interest rate increase within the following six months.
AI investment faces growing scrutiny
Financial markets are also showing signs of strain. Indonesian equities fell more than 11% on Oct. 16 after MSCI warned of a potential loss of emerging-market status. The Jakarta Composite Index was down more than 40% for the year, while the rupiah had weakened approximately 7% against the US dollar.
Moody’s also pointed to investor concerns about the sustainability of AI infrastructure spending, particularly among neocloud companies that build data centers and lease computing capacity to AI developers.
“The sharp selloff in several high-profile neoclouds — companies that build data centers and lease computing capacity to AI developers — suggests investors are becoming less willing to underwrite the build-out at any price,” the report said.
The report warned that tighter financing conditions or disappointing returns could force data center developers to scale back investments or defer projects, eventually affecting semiconductor orders and the broader Asian technology supply chain.
“Chip demand need not collapse for the investment cycle to turn. A reassessment of the returns on investment may be enough,” it said.
AI-linked economies retain growth advantage
Despite the risks, economies closely integrated into the AI supply chain are expected to outperform the broader regional trend.
South Korea, Taiwan, Singapore and Malaysia are projected to grow faster in 2026 than in 2025. India, Vietnam and Indonesia are also expected to outpace mainland China this year.
Moody’s identified a possible escalation of conflict in the Middle East and El Niño-related disruptions as additional risks that could trigger simultaneous energy and food price shocks, further weakening household purchasing power and increasing pressure on central banks.
Full disclosure: All news articles published on the TechSabado website are written by human journalists, unless otherwise specified. Final text editing is also performed by human editors, with artificial intelligence (AI) used only to assist with additional grammar and style guide corrections..
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