Microsoft Promises $1.7bn Investment in AI in Indonesia

Microsoft is going to invest $1.7 billion to build artificial intelligence (AI) and cloud services in Indonesia over the next four years, the company’s chief executive officer (CEO) Satya Nadella today said.

Nadella met President Joko Widodo along with other cabinet ministers and discussed the way forward in regard to AI research and talent development.

President Widodo recommended Microsoft establish its local data centres on the popular holiday island of Bali or in the new capital city of Nusantara.

• Nadella is touring Southeast Asia as a part of his official tour to promote Microsoft's generative AI technology in the region.

   

• Indonesia is the first country he set foot on during the tour. Malaysia and Thailand are due later this week.

Before you venture further, it’s best to learn a little about AI.

A much-(mis)used term, AI has come to mean a lot of things.

To put it simply, AI is a technology that enables computers and digital devices to learn, read, write, create and analyse.

AI helps devices imitate human intelligence and execute tasks that are traditionally done by human beings.

AI Trends in Indonesia

Indonesia is a tech vibrant economy with a young working population and a startup-driven ecosystem.

As far as AI is concerned, the country—like several others—is still exploring the frontiers of the latest technology. 

The Ministry of Communication and Informatics (KOMINFO) some time back issued a circular, rather than a strict regulation, on AI, arguing that the measures taken for now will be focused on supervision and governance of AI to reduce potential risks, given that the country is still in the early stages of exploration and innovation of AI adoption.

In December last year, the Indonesian government issued two sets of ethical guidelines on the use of artificial intelligence.  

As of now, AI in Indonesia is governed under the Information and Electronic Transactions Law and the Personal Data Protection (PDP) Law.

Nadella said that the company will train 2.5 million people in AI by 2025 in the member states of the Association of Southeast Asian Nations (ASEAN). 840,000 individuals out of this force will be based in Indonesia.

The investment is Microsoft’s single largest in its 29-year history in Indonesia.

“This new generation of AI is reshaping how people live and work everywhere, including in Indonesia... The investments we are announcing today – spanning digital infrastructure, skilling, and support for developers – will help Indonesia thrive in this new era,” the Microsoft CEO said.

Indonesia's Minister of Communications Budi Arie Setiadi said, 

“I am confident this partnership will open up new horizons for Indonesia, positioning us not only as consumers of technology but as pivotal contributors to the global technological supply chain.”

 

Indonesia itself has a huge demand for cloud computing services and looks to leverage the economic opportunities arising out of AI tech, both of which Microsoft is going to capitalise on, the company statement read.

The statement also cited Kearney research that said AI could contribute nearly $1 trillion to Southeast Asia’s gross domestic product by 2030 out of which Indonesia is poised to capture $366 billion.

The endeavour is part of the company’s Empower Indonesia drive that was announced way back in February 2021. 

Microsoft Benefits from AI Boom Since 2023

The AI sector saw spectacular boom in 2023, dubbed AI Boom by the media.

Thanks to the excitement surrounding AI, the MegaCap stocks of the “Magnificent Seven”—Nvidia, Meta, Tesla, Alphabet, Apple, Microsoft and Amazon—rose dramatically last year.

The tech multinational Microsoft invested $10 billion in Sam Altman’s OpenAI for a 49% stake. The support offered by Microsoft CEO Satya Nadella to Altman during the latter’s tiff with OpenAI Board also made news.

Thanks to the partnership, Microsoft has a special access to OpenAI's innovative AI tech. The company is seeking to leverage the generative AI tech and enrich its products such as Azure, Bing, Microsoft 365 etc. with the AI technology.

It was Microsoft’s timely and prudent endeavour with generative AI due to which the company surpassed Apple to become the world’s most valuable company.

As of now, its market cap stands at a little above $3 trillion. 

Source: CNBC

Within a span of a year, the company’s stock has steadily grown from only a little above $300 in May 2023 to a little above $400 at press time—a growth of over 33% over 12 months.

The company last week released its fiscal third-quarter results.

• Revenue: $61.9 billion
• Microsoft Cloud revenue: $35.1 billion
• Operating income: $27.6 billion
• Net income: $21.9 billion
• Diluted earnings per share: $2.94 

Nadella credit AI transformation for the remarkable results. 

He said,

“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry."

The company has been increasing its capital expenditures to secure Nvidia graphics processing units (GPUs) to train and operate its AI models.

Microsoft offers its Cloud services to OpenAI for its ChatGPT chatbot. Other leading tech companies have also been accessing Microsoft’s Azure AI services to train their in-built services for text summation and documentation.

Microsoft spent $14 billion in the first quarter of 2024 for AI development.

Collectively, Microsoft, Meta, and Alphabet invested $32 billion in Q1 2024 for the same. 

AI To Contribute $15.7 Trillion in 2030?

PwC recently estimated in in a report:

• AI could contribute up to $15.7 trillion to the global economy in 2030.

   

• Of this, $6.6 trillion is likely to come from increased productivity and $9.1 trillion is likely to come from consumption-side effects.

   

• The greatest economic gains from AI will be in China (26% boost to GDP in 2030) and North America (14.5% boost), equivalent to a total of $10.7 trillion and accounting for almost 70% of the global economic impact.