KUALA LUMPUR, July 9 (Xinhua) -- Malaysia's technology sector is expected to remain on a growth trajectory in the second half of 2026, supported by strong artificial intelligence (AI) and data center-related demand, although research houses remain divided on the pace and breadth of the recovery.
TA Securities said it is cautiously optimistic on the sector despite forecasts for continued expansion in global semiconductor sales. The research house expects growth to be concentrated in AI-linked segments such as integrated circuit (IC) design, optoelectronics, semiconductor equipment, and packaging and testing.
Companies with exposure to AI, data centers, networking and high-performance computing applications are likely to outperform those reliant on traditional end markets such as personal computers and smartphones, which continue to face softer demand conditions, said the research house.
TA Securities also highlighted trade uncertainties, geopolitical tensions, memory supply constraints and a potentially stronger ringgit as key risks that could weigh on sector performance.
However, it noted that Malaysia's National Semiconductor Strategy (NSS) should provide longer-term structural support by strengthening domestic capabilities and encouraging participation in higher value-added activities.
Meanwhile, Maybank Investment Bank expects most Malaysian technology companies to deliver results broadly in line with expectations, with AI and data center demand remaining the primary growth driver amid sustained capital expenditure by hyperscalers.
The research house also identified photonics and optical transceivers, advanced cooling and testing solutions, and advanced packaging as emerging growth areas.
It added that Malaysia's digital transformation is evolving beyond smart city initiatives towards "AI Cities," aimed at enhancing urban efficiency through AI adoption and strengthening the country's position as a regional AI hub.
Maybank also remains positive on the software sector, citing its largely domestic and regional footprint, which provides a degree of insulation from global geopolitical tensions. Continued digitalization across industries is expected to support resilient demand through the remainder of the year.
MBSB Research, however, maintained a neutral stance on the sector. While acknowledging that AI is improving the semiconductor industry's fundamentals and supporting global sales growth, it noted that AI-related revenue has yet to become the dominant earnings contributor for most companies.
The research house also flagged persistent challenges in the smartphone market, including memory shortages, geopolitical tensions, tariff uncertainties and foreign exchange volatility, which could continue to pressure earnings. ■
