Episode summary
Asia’s Capex Boom Goes Beyond AI
Thoughts on the Market (Morgan Stanley)
· · Guests: Chetan Ahya
Summary
Asia’s growth story, according to Chetan Ahya, is shifting from a narrow AI trade to a much broader capital-expenditure cycle spanning AI, energy, defense, and industrial investment. He argues the region is entering an industrial super cycle, with total investment projected to rise from about 11 trillion today to $16 trillion by 2030, implying 7% annual growth over five years and faster 16% growth in the high-growth sectors.
Ahya says AI remains important, but it is only one driver. Asia must fund more AI infrastructure, chip and memory capacity, energy grids and storage, and defense spending as geopolitical risks rise. He points to China, India, Japan, Korea, and Taiwan as key beneficiaries, while also saying broader supply-chain reorientation and onshoring are lifting industrial demand across the region.
He argues the evidence is already visible in the data: capital goods imports are up 27% year over year in dollar terms, industrial production is near a 4-year high, and non-tech exports have recovered since the fourth quarter of last year. In his view, the capex boom should feed into jobs, income, and then consumption, making this a broader regional recovery rather than just an AI-led trade.
Key takeaways
- Chetan Ahya expects Asia’s total investment to rise from about 11 trillion today to $16 trillion by 2030, implying 7% annual growth.
- He says high-growth sectors such as AI, energy, defense, and broader industry could see capex grow about 16% a year.
- He sees China, Japan, Korea, and Taiwan as the biggest beneficiaries because they serve both domestic demand and export demand.
- He says India’s industrial upside is more tied to its own domestic capex cycle than to external demand.
- He points to 27% year-over-year growth in capital goods imports as evidence that Asia’s industrial cycle is already strengthening.
Notable quotes
“We think Asia is entering an industrial super cycle and this is being driven by a sustained rise in capital expenditures across AI, energy, defense and broader industrial sector”
“We forecast Asia's total investment could rise from about 11 trillion today to $16 trillion by 2030”
“The power demand for AI compute is growing exponentially”
“The region stands to reap the benefits of a rise in capex twice over”
“This next chapter of Asia's growth story will filter through from capex to jobs and income growth and then through to the consumer”
How the episode opens
Welcome to Thoughts on the Market. I'm Chaitananya Naya Morgan Standi's chief Asia economist. Today, why Asia is headed towards its strongest industrial cycle since the mid200s.
It's Tuesday, May 26th at 2 p.m. in Hong Kong. The market narrative in Asia has been narrowly, almost exclusively focused on artificial intelligence.
But AI is just one aspect of a much broader shift across the region. We think Asia is entering an industrial super cycle and this is being driven by a sustained rise in capital expenditures across AI, energy, defense and broader industrial sector. The numbers behind this are substantial.
We forecast Asia's total investment could rise from about 11 trillion today to $16 trillion by 2030. So this implies a 7% annual growth rate over the next 5 years which is triple the pace of the past two years making it quite significant. And for the high growth sectors such as AI, energy, defense and broader industrial sector we expect capex to grow at an even faster run rate of about 16% a year.
Now let's talk about the drivers. No doubt the first big driver behind this momentum is AI. Asia needs to invest more in AI infrastructure.
At the same time, Asian chip makers and memory producers are lifting capex to meet demand of US hyperscalers for building data centers. The second driver is energy. Asia needs to invest in the energy sector for three reasons.
For powering AI, energy transition and energy security. The power demand for AI compute is growing exponentially. On top of that, economies are having to shift towards renewables and that needs more investment in grids, storage and power equipment generation.
Moreover, the recent geopolitical tensions have made energy security a bigger policy priority especially for Asia which is dependent on imported energy.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- asia capex
- ai spending
- energy investment
- defense spending
- industrial cycle
Watch the episode
Watch “Asia’s Capex Boom Goes Beyond AI” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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