HLIB Research said high-performance computing demand is likely to experience a strong recovery.
PETALING JAYA: Hong Leong Investment Bank (HLIB) Research expects the technology sector to be boosted by front-loaded orders in anticipation of uncertainties in politically-driven trade barriers in the first half of this year (1H25).
However, the research house did not expect any significant capital expenditure upcycle in the near term before industry utilisation rates return to the optimal levels.
Furthermore, HLIB Research expected the greenback to be weaker to average at RM4.35 per US dollar this year compared with RM4.58 in 2024.
“As such, we expect tech firms to be impacted as their sales are denominated in US dollars while partly offset by the US dollar cost items,” the research house added.
Except for steel, gold, aluminium and copper prices are at elevated levels and may spell bad news for tech players.
“Pricier commodities will exert pressures on margins for packagers and equipment makers. In view of the excess capacity in the sector, tech players might face challenges passing on the higher material costs to customers,” HLIB Research said.
It noted that high-performance computing demand is likely to experience a strong recovery as global tech players rush to develop their artificial intelligence (AI) capabilities.
“Automotive is no longer expected to be the main growth driver for the tech industry as end-demand is impacted by high interest rate environment and weak consumer sentiment,” it added.