PETALING JAYA — The technology sector in Malaysia is expected to maintain its positive momentum, driven by robust demand related to artificial intelligence (AI), ongoing multi-year capacity expansions, and continued government policy support, according to a report by Apex Research.
The research firm highlighted that while semiconductors remain a key area of focus, the growth narrative is broadening to include segments such as precision cleaning, outsourced semiconductor assembly and testing, radio frequency components, custom AI and high-performance computing chip design, as well as electrical equipment for data centers. The diversification indicates deeper integration of AI demand across multiple facets of the technology supply chain.
An analyst closely following the sector echoed this optimistic view, noting that the industry still has potential for growth. This outlook is underpinned by a sustained semiconductor upcycle, increasing AI-driven demand, and improved visibility on order books. However, the analyst cautioned that further gains in share prices will increasingly depend on companies translating these conditions into tangible earnings growth.
Recent industry checks conducted in Penang, a key semiconductor hub, revealed strong AI-related demand projected to continue into 2027 and 2028. Supply constraints, rather than demand issues, have emerged as the primary challenge. Many companies are operating at full capacity, with longer lead times for inputs, heightened working-capital requirements, and shortages of experienced engineers presenting significant hurdles. With order books largely secured, the focus has shifted towards the timing of capacity ramps, execution of shipments, and absorbing associated costs.
Of 11 companies tracked directly by Apex Research in comparable quarterly periods, two exceeded expectations, six met forecasts, and three fell short. The firm also noted that as multinational corporations expand their local sourcing and manufacturing activities in Malaysia, the AI-related capital expenditure cycle is expected to broaden across the technology value chain.
The upcoming Budget 2027, set to be tabled on October 9, is anticipated to further support the sector, though Apex Research does not expect a major new funding allocation specific to the next phases of the National Semiconductor Strategy. Instead, it forecasts continued targeted measures, including funding, incentives, ecosystem development, and talent cultivation.
Apex Research has expressed preference for companies with proven execution capabilities, transparent order books, and direct exposure to AI infrastructure and advanced packaging technologies. Its current top stock picks are ViTrox Corp Bhd, EG Industries Bhd, and QES Group Bhd, all rated as buys with price targets of RM11.12, RM2.93, and 75 sen respectively.
Despite the favourable outlook, valuations have risen, with the Kuala Lumpur Technology Index now trading at 30.3 times forward earnings, slightly above its five-year average of 29.1 times, indicating a relatively elevated market valuation for the sector.