PETALING JAYA: Malaysia’s technology sector is poised for another leg of growth in the second half of 2026, underpinned by a broadening semiconductor upcycle that is expanding well beyond artificial intelligence (AI).
However, after a strong share price rally this year, analysts are urging investors to be more selective as valuations become increasingly demanding.
Hong Leong Investment Bank (HLIB) Research maintained its “overweight” call on the sector, saying, “The semiconductor upcycle has broadened well beyond AI, pulling almost the entire supply chain into an upturn in 2026.”
It added that despite the Bursa Malaysia Technology Index surging 34% in the first half, further earnings delivery and positive revisions are still ahead.
Kenanga Research, meanwhile, retained a more cautious “neutral” stance despite describing the current cycle as bigger, longer, but not without risks.
It believes the global semiconductor industry is entering a stronger growth phase, with worldwide semiconductor sales expected to exceed US$1.5 trillion in 2026 before approaching US$1.9 trillion in 2027, driven by AI infrastructure, high-bandwidth memory and advanced computing.
Both research houses agree that this cycle differs fundamentally from previous semiconductor recoveries.
Instead of relying on smartphones, Personal Computers and consumer electronics, demand is increasingly fuelled by hyperscalers investing heavily in AI infrastructure, resulting in significantly higher semiconductor content, more advanced packaging and stronger demand across the semiconductor ecosystem.
Kenanga Research expects Malaysia to benefit from the industry’s shift into higher-value activities, particularly advanced packaging, automation, IC design and supply-chain integration.
However, it cautioned the country’s exposure to cutting-edge technologies such as 2.5D and 3D packaging, hybrid bonding and glass substrates remains limited, meaning the gains will likely accrue to selected companies rather than the sector as a whole.
Kenanga Research raised its valuation benchmarks for outsourced semiconductor assembly and test companies, arguing the current cycle is structural and durable.
