PETALING JAYA: Apex Securities Research has maintained an “overweight” rating on the Malaysian technology sector, highlighting a significant divergence in performance among industry players.
While a robust artificial intelligence (AI)-driven capital expenditure (capex) cycle and demand for advanced packaging remain structural tailwinds benefiting companies like Vitrox Corp Bhd
, QES Group Bhd and MI Technovation Bhd, broader growth is hindered by the strengthening of the ringgit, the research house warned.
Amid the ongoing geopolitical conflict between the United States and Iran, investors are encouraged to focus on AI proxies and data centre infrastructure, as current sector valuations sit attractively below historical averages.
Apex Securities said despite risks in the smartphone and automotive segments, the long-term outlook for the local tech sector remains positive due to structural demand for high-performance computing.
“AI will likely remain the key structural growth driver for the Malaysian technology sector in 2026, supporting continued demand across the semiconductor supply chain,” the research house further said.
Apex Securities based this on the fact that leading global firms such as Nvidia Corp expect “agentic AI inflection points”, while Taiwan Semiconductor Manufacturing Co Ltd is guiding for nearly 30% revenue growth in 2026.
Locally, this translates into a surge in demand for advanced packaging, optical modules and data centre infrastructure.
Hence, the research house expects ViTrox to benefit from a standout pipeline in AI server inspection, while MI Technovation can ride the wave of high-bandwidth memory and advanced packaging through its solder ball and die sorter business.
Frontken Corp Bhd is positioned for a record year as its key Taiwan-based customer ramps up two nanometre node production, Apex Securities said, adding that the firm is the most insulated against changes in the ringgit’s exchange rate.
However, Inari Amertron Bhd faces “asymmetric downside” as it is struggling with a contracting global smartphone market – projected to shrink by over 10% in 2026 – combined with high sensitivity to the strengthening of the local unit.
The research house noted that on the cost side, elevated raw material prices present an additional headwind, but are more amenable to pass-through, albeit with a lag.
On the Iran war issue, Apex Securities predicted a base case of rolling extension of negotiations rather than a clean permanent deal, which will sustain the current ringgit strength without delivering full input cost relief.
It added that Frontken and Aurelius Technologies Bhd (ATech) are the clearest relative beneficiaries under an escalation scenario, with Frontken benefiting from refurbishment demand and oil and gas exposure, while ATech’s oil exploration devices segment sees incremental uplift as elevated oil prices accelerate operator monitoring capex.
“We continue to favour ViTrox, MI Technovation and Frontken as top picks, with the conflict outcome determining the pace of earnings delivery rather than the direction of the multi-year growth thesis,” Apex Securities said.
It has a target price of RM5.30 a share for ViTrox, RM4.20 for MI Technovation and RM4.60 for Frontken.
