PETALING JAYA: Malaysia’s semiconductor-related stocks continue to shine, with automated test equipment (ATE) players leading the way as some investors see them as beneficiaries of the artificial intelligence (AI) boom.
“When AI demand surges, it lifts the entire semiconductor industry, as it involves chip fabrication processes.
“When there is more business for foundries, there is more business for outsourced semiconductor assembly and test (Osat) companies, which in turn drives demand for machines and equipment,” Trident Analytics chief research officer Peter Lim Tze Cheng told StarBiz.
Stocks such as UWC Bhd
and Vitrox Corp Bhd, both ATE players, shot up by 6% and 5%, respectively, yesterday, followed by smaller gains by companies like Malaysian Pacific Industries Bhd and Unisem (M) Bhd, with 4% and 3.3%, respectively.
The rally was even more pronounced among precision engineering-related counters.
Shares in Kobay Technology Bhd surged nearly 9%, while Northeast Group Bhd rose about 6% and Ambest Group Bhd gained 5%, reflecting broad-based buying interest across the segment.
“AI is definitely a contributing factor to the current rally. All the segments in the technology sector are expected to see gains, starting with computer numerical control (CNC) players, followed by Osat, ATE and electronics manufacturing services (EMS) companies,” one fund manager said.
He believes the rally is “justified with more upside”.
Elaborating, he said a compound annual growth rate (CAGR) of at least 30% in earnings is expected for this year and next, although this applies more to CNC players.
Other segments may not grow as fast, with a sector-wide CAGR of around 20%, the fund manager added.
Trident Analytics’ Lim said the current rally is a continuation of the upcycle that began last year, following a downturn in the tech sector between 2023 and 2024.
“This present uptrend is just the beginning. We are going to see a very strong upcycle in the semiconductor sector for the next three to five years.
“Many precision engineering and metal fabrication companies are seeing strong order flows, and these firms are coming back in a very big way,” he said.
Lim added that the upcycle is driven by data centre expansion, with global investments in AI infrastructure continuing to accelerate.
He noted that industry players have ramped up spending on data centres to about US$200bil this year, roughly double last year’s levels, underscoring strong demand for chips and related equipment.
Tradeview Capital chief investment officer Nixon Wong, however, has a more measured view, saying the current tech rally is running ahead of fundamentals, with “valuation expansion and AI hype doing a lot of the heavy lifting”.
Wong said the rally is “partly justified”, as the global semiconductor upcycle is real, driven by AI, data centres and high-performance computing.
On the upcoming earnings performance of local tech companies, Wong said the sector still faces near-term risks due to weak seasonal factors and foreign-exchange (forex) impact.
“Companies’ order books are improving, and AI-related demand is translating gradually into revenue in the medium to long term. So earnings are expected to continue to improve, but it will not be fast enough to fully justify the sharp stock moves,” he said.
Wong maintained that while AI is driving capital expenditure (capex) cycles, order visibility and sector rerating, Malaysian tech companies have limited direct exposure to leading-edge AI chips.
He added that most equipment players are involved in servers, as well as advanced packaging and imaging, which are supported by higher capex spending from tech giants.
Hence, sentiment and narrative continue to play a larger part in this rally, with earnings only catching up now.
“Of all the segments in the tech sector, the ATE segment benefits more from the AI trend, as AI server buildouts and advanced chip complexity require more testing.
“Osat firms with advanced packaging capability will also benefit, as this is critical for AI chip builds. Moreover, CNC and automation players are more closely tied to the capex cycle, so they could be more cyclical and riskier, if spending slows.
“EMS comes last in terms of beneficiaries, because of limited AI exposure,” Tradeview Capital’s Wong said.
Year-to-date, the Bursa Technology Index is up 15%, having risen 3% yesterday from last Thursday’s close, tracking a broader regional tech rally.
Tech-heavy benchmarks surged across Asia, with the Kospi up more than 5.12% and the Taiex rising 4.6% yesterday, while key chipmakers such as SK Hynix Inc and Taiwan Semiconductor Manufacturing Co Ltd gained 13% and over 7%, respectively.
The upswing comes on the back of strong earnings results from US mega-cap companies such as Alphabet Inc, Apple Inc and Amazon.com Inc in recent weeks.
Alphabet’s shares, in particular, jumped more than 10% following robust growth in its cloud and AI businesses.
Global markets appear increasingly willing to look past geopolitical tensions and refocus on the AI-driven growth narrative.
Looking at Malaysia, early earnings releases suggest that the tech rally is not purely sentiment-driven, with some companies already reporting strong growth and guidance.
ViTrox posted a 112% year-on-year jump in net profit to RM51.2mil for the first quarter ended March 31, 2026 (1Q26), while revenue rose 89% to RM267mil, driven by stronger demand for its automated board inspection and machine vision system solutions amid a recovery in the global semiconductor industry.
Unisem (M) Bhd, meanwhile, slipped into a net loss of RM13.4mil in 1Q26 despite a 10% increase in revenue to RM464.7mil, as higher production costs, weaker utilisation and forex pressure outweighed stronger automotive and industrial revenue.
However, Unisem has guided for a strong rebound in 2Q26, with a 15% to 20% quarter-on-quarter increase in US dollar revenue, which Kenanga Research described as “unusually strong relative to its historical guidance range.”
“This is the trend, where earnings are strengthening. The upcoming earnings season is expected to be positive for tech companies, and this is not a short-term blip.
“Instead, earnings are likely to remain robust over the next three to five years, in line with the projected upcycle period,” said Lim of Trident Analytics.
When asked why the impact of AI is only now being felt in the local tech sector, despite being a prevailing theme for some time, he said there had previously been significant excess capacity among semiconductor players.
As a result, these companies did not need to invest in new machines.
However, much of that excess capacity has since been used up, creating renewed demand for machinery and upgrades.
“This AI-driven tech upcycle is unlikely to reverse anytime soon. Unless people suddenly stop using large language models, cloud services or other AI tools – or decide they no longer need faster data processing – it is hard to see what could cap the upside,” Lim said.
