New AWS research reveals 2.4 million Malaysian businesses now use AI, but a stark divide is emerging between those experimenting with chatbots and those building revolutionary business models.


There’s a number that should make Malaysian policymakers both proud and worried: 2.4 million. That’s how many businesses in the country now use artificial intelligence—a 35% surge from last year that represents 630,000 new adopters, or more than one every minute throughout 2024.

But here’s the uncomfortable truth buried in those impressive statistics: most of these businesses are using AI the way you might use a calculator—helpful for basic tasks, but hardly transformative. Meanwhile, a small cohort of companies, particularly startups, are wielding AI like a forge, reshaping entire industries and leaving their slower-moving competitors in the dust.

New research from Amazon Web Services, based on surveys of 1,000 Malaysian businesses representative by size, sector and region, reveals what might be called the “AI adoption paradox”: widespread use masking a dangerous competency gap.

The 73% problem

While 27% of Malaysian businesses have adopted AI—up from 20% last year—a staggering 73% remain stuck at what the research terms “basic levels” of integration. These companies are using publicly available chatbots for scheduling, purchasing off-the-shelf AI tools for data analysis, or implementing ready-made cybersecurity solutions.

The benefits are real but modest: efficiency gains, streamlined processes, perhaps some cost savings. What they’re not achieving is innovation, new business models, or industry disruption.

Only 10% of Malaysian businesses have reached the most advanced stage of AI adoption, where they combine multiple AI tools for complex predictive analytics or build custom AI systems that enable entirely new revenue streams.

The retail sector exemplifies this surface-level engagement, with 85% of its AI-adopting businesses concentrated at the most basic stage—the highest proportion of any industry surveyed.

Startups vs. giants: The two-tier economy

The most striking finding is the performance gap between Malaysia’s startups and its large enterprises—a “two-tier AI economy” that threatens to calcify if not addressed.

Among startups (defined as businesses founded within the last two years), 48% are leveraging AI throughout their operations. Critically, only 46% of these startups remain at basic AI adoption levels.

Compare that to large enterprises with 500 or more employees: while 44% have adopted AI technologies—significantly above the national average—a whopping 74% of these large companies remain at elementary stages of use.

The gap widens when examining innovation. Some 31% of startups are developing new AI-driven products and services, compared to just 15% of large enterprises. Additionally, 27% of startups have AI at the core of their business proposition, and 41% employ AI-specific talent—investments that signal long-term commitment rather than experimental dabbling.

“This ‘two-tier’ AI economy—with tech-driven startups outpacing larger, established enterprises in AI innovation—can impact Malaysia’s AI-driven growth and innovation in the years to come,” the report warns.

“It is an interesting phenomenon we are seeing with AI adoption coming out of the study results in Malaysia. While 27% of businesses reported they have adopted AI, most of the deployments remain basic despite the rapid adoption of the technology over the past year,” said Nick Bonstow, Director at Strand Partners.

“The differences in the pace and depth of AI innovation between startups and large enterprises also point to an emerging ‘two-tier’ AI economy that could have lasting implications on a country’s future economic development. Celebrating AI adoption numbers alone masks the deeper challenges many businesses face across Malaysia.” he added.

The ROI is there—So what’s holding businesses back?

The economic case for deeper AI integration is compelling. Among adopters, 65% report revenue increases averaging 19%, while 72% have seen significant productivity improvements. Looking forward, 74% believe AI will increase their growth in the next year, and 67% expect cost savings averaging 15%.

Yet three formidable barriers are preventing companies from moving beyond superficial adoption:

The skills crisis tops the list – With 52% of businesses citing lack of digital skills as their primary barrier, the talent shortage is acute. Companies report the most lacking capabilities are adapting to new digital technologies (43%), data analysis and interpretation (39%), and basics of AI and machine learning (32%).

The premium businesses are willing to pay tells the story: they’d increase salary offers by 34% to candidates with strong AI skills. Yet only 22% of employees have participated in digital training or upskilling in the past year, while businesses expect AI literacy to be important for 54% of jobs within three years.

Regulatory uncertainty creates hesitation, even in Malaysia’s currently light-touch environment. While 49% of businesses hope future AI rules will provide a stable framework, concerns about increased compliance costs (42%), slowed innovation (41%), and lack of legal certainty (40%) weigh heavily on strategic planning.

Perceived costs remain a psychological barrier, with 39% citing upfront expenses as a concern—despite documented ROI from peers. Interestingly, 31% say they need a clearer understanding of AI’s return on investment, suggesting a communication challenge as much as a financial one.

Sectoral leaders and laggards

Some industries are pulling ahead. Technology and professional services lead adoption at 49%, followed by financial services (42%) and manufacturing (39%).

Financial services also dominates advanced AI integration, with 21% at the most sophisticated stage of adoption, followed by technology (20%) and healthcare (15%). These sectors are moving beyond chatbots to predictive analytics, custom AI systems, and AI-enabled business model innovation.

Notably, 81% of Malaysian businesses overall—and 83% of startups—believe AI will transform their industry within five years, indicating that awareness isn’t the problem.

The way forward

AWS’s research concludes with three recommendations that acknowledge the complexity beyond typical “digitalize faster” platitudes.

First, accelerate industry-specific skills programs through public-private-academic partnerships. The government’s RakyatDigital initiative reached over 1 million users in six months since January 2024, demonstrating demand exists.

Second, establish pro-innovation regulatory frameworks including AI sandboxes where companies can test solutions under supervised conditions while regulators refine future rules.

Third, increase public sector AI adoption to build market confidence. With 71% of businesses saying they’re more likely to expand AI use when the government leads by example, and 76% of startups calling public sector adoption “crucial” to their scaling ability, the government’s digital transformation becomes an economic multiplier.

Malaysia stands at a crossroads. Its 2.4 million AI-adopting businesses represent genuine momentum, but the shallow depth of most implementations threatens to leave the country behind more aggressive regional competitors.

The question isn’t whether Malaysia has embraced AI—clearly it has. The question is whether it can graduate from AI’s elementary school before the global economy moves on to graduate-level applications.

As Hussein Mohd. Ali, Country Manager, AWS Malaysia puts it, “For this

cycle to reach its full potential, we must address the skills gap, only then can we accelerate the entire country’s digital economy.”

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