Southeast Asia plus China, Japan and South Korea are more at risk than most economies to any potential collapse in the artificial-intelligence boom, which could trigger shocks across financial markets and the real economy.
The region is “particularly exposed” because it’s at the center of global AI supply chains and “increasingly integrated into AI-related financial markets,” the Asean+3 Macroeconomic Research Office said in its 2026 Financial Stability Report published on Monday.
“A disorderly correction could therefore propagate through multiple channels — including lower technology exports, portfolio losses, capital outflows, refinancing pressure on leveraged technology and infrastructure firms, and weaker investor confidence,” it said.
The report comes amid growing investor concern about the AI boom, including the high valuation of tech companies, the surge in spending on chips and data centers, and circular financing deals in which companies appear to be funding each other. Tech-related exports have been helping Asia withstand the impact of high energy prices and US tariffs.
Much of the physical production in the technology cycle takes place in Asia, from memory chips in South Korea to semiconductor assembly in Malaysia. The region accounted for two-thirds of the growth in global AI-related trade, AMRO said. Should AI demand suddenly fall short, a pullback in capital spending would undermine export revenues, investments and broader economic growth.
Some regional equity markets are also heavily concentrated on AI, such as South Korea, exposing them to a sharp correction in prices. Other markets like Japan and Hong Kong have come to move closely in line with US AI and technology firms, meaning shocks could also be transmitted even absent a domestic trigger, according to AMRO.
As hyperscalers increasingly turn to borrowings to fund costly data center buildouts, higher leverage could amplify shocks if AI returns disappoint, the report said. Opaque private credit markets and circular financing deals could worsen the instability.
“A sharp correction in AI-related financial assets could spill over to the broader financial system through forced deleveraging and tighter credit conditions,” AMRO said.
Central bankers around the world, from the Bank of England to the Monetary Authority of Singapore, have increasingly raised concerns about whether massive AI investments can be sustainable. The technology has developed at breakneck speed, but stiff competition among developers, higher borrowing costs and growing pushback against data centers and AI’s security threats have raised concerns. — Bloomberg
