The technology sector is on the brink of a significant upswing with the anticipated fit-out phase of Malaysia's data centre boom, projected to unfold from Q4 2024 to H1 2025. The total addressable market (TAM) for this expansion is estimated at RM97.8 billion, setting the stage for substantial benefits to tech and EMS players such as PIE, NATGATE, MPI, and INARI. Notably, PIE, LGMS, and INARI are highlighted as top picks by analysts due to their strategic positioning and strong performance outlooks.
Analysts at Kenanga have given an Overweight rating on tech stocks, noting that while the data centre construction phase has bolstered sectors like construction and property, tech players are expected to gain momentum during the fit-out phase. LGMS, a key player in cybersecurity, is singled out as the only pure-play cybersecurity service in Malaysia with a substantial competitive edge. This sector's growth is attributed to its integral role in the data centre ecosystem, which has yet to receive the attention it merits.
Malaysia's data centre sector is mirroring the early stages of the solar energy boom, presenting numerous opportunities for both construction and fit-out businesses. The current emphasis on construction has seen property companies benefit from land sales and collaborations with international operators. Johor has emerged as a notable hub, with companies such as Equinix and Airtrunk establishing facilities, leveraging its proximity to Singapore and lower operational costs.
The fit-out phase, crucial for equipping newly built data centres with essential components, is expected to be a key driver for tech firms specializing in server and server-related equipment. This stage is forecasted to commence in late 2024 and extend into early 2025, creating a lucrative period for technology companies to capitalise on.
Given the forecasted increase in IT capacity to over 3,000MW in Malaysia, the market for AI servers is estimated at approximately RM97.8 billion. This growth trajectory, combined with potential updates to efficiency guidelines by the Malaysian government, presents a ripe environment for investment in tech stocks.