RHB Investment Bank Bhd (RHB Research) has maintained its OVERWEIGHT call on the technology sector, emphasising its optimism for a sector recovery in 2025, driven by firmer demand and a replacement cycle. Out of nine stocks covered, RHB Research rated seven as BUY and two as NEUTRAL, despite noting a negative earnings revision trend over the past year.
The research house believes Malaysian technology firms will face limited direct impact from new US restrictions on artificial intelligence (AI) chip exports, although indirect effects remain uncertain.
The US plans to impose tighter export controls on AI chips, particularly targeting data centres (DCs) outside Tier 1 countries. Under the restrictions, US firms can seek blanket permissions to ship AI chips, provided that computing power in Tier 2 nations, including Malaysia, remains below specific thresholds.
Malaysia's new AI DC capacity is relatively small, with its 1.4GW of operational or planned capacity well under the restrictions. Most local AI DCs are owned by US-based firms, suggesting minimal immediate disruption. However, the restrictions are likely to have greater implications for Chinese DC developers reliant on advanced AI chips.
RHB Research stated that the new policies might slow the supply chains of GPU and CPU servers, with only a few Malaysian companies expected to face direct effects. Firms like Nationgate Holdings Bhd, with over 85% of revenue tied to AI server and switch assembly, and PIE Industrial Bhd, with under 10% exposure, could see some impact.
Meanwhile, companies such as Malaysian Pacific Industries Bhd and Unisem Group are predicted to experience minimal disruption due to their limited exposure to power management chips used in server production.
The ripple effects of the restrictions could influence other segments of the semiconductor supply chain, potentially leading to slower sales for firms producing semiconductor equipment. Vitrox Corp, Mi Technovation Bhd and Pentamaster Corp Bhd, as well as Frontken Corp, which supports major fabs, may encounter dampened demand. Engineering support providers such as UWC Bhd, SAM Engineering & Equipment (M) Bhd and Coraza Integrated Technologies Bhd might also see reduced activity in the AI-related chip segment.
RHB Research concluded that, while the KLTEC index fell by 2.44% following the announcement, the overall impact on Malaysian technology firms should remain manageable. The research house maintained its positive outlook for the sector, driven by broad-based demand recovery, despite the challenges posed by the US export restrictions.
