PETALING JAYA: There is still further upside for the technology sector, supported by the ongoing semiconductor upcycle, artificial intelligence (AI)-related demand and improving order visibility, with its current premium valuation well justified by strong earnings growth prospects.
Berjaya Research head of research Kenneth Leong said while the Bursa Malaysia Technology sector is currently trading at 58.1 times price-to-earnings (PE) multiple, which is around plus one standard deviation above its historical one-year average, the premium is well justified.
Leong noted that forward PE multiples of 30.9 times and 23.2 times for 2026 and 2027, respectively, suggest that the sector’s seemingly elevated trailing valuation should moderate significantly as earnings accelerate.
“Supported by the ongoing semiconductor upcycle, AI-related demand and improving order visibility, we believe there remains further upside for the sector, although future share price gains will ultimately be tied to the delivery of actual earnings performances.
“Should there be any price correction, we strongly believe this would present an attractive opportunity to accumulate fundamentally sound technology stocks,” he told StarBiz.
Leong said in general, technology companies have delivered a strong set of quarterly earnings in the latest quarter, riding on the improvement in demand across the semiconductor and outsourced semiconductor assembly and test (OSAT) space.
Companies with larger exposure to structural growth areas such as AI, data centres (DCs) and high-performance computing notably delivered stronger sets of performances, he added.
“Under our coverage, MI Technovation Bhd
delivered a positive surprise.
“The outperformance was largely attributable to the stronger-than-expected contribution from its semiconductor material business unit.
“This was driven by resilient demand in the high performance computing and memory and mobility and wearables segments, as well as a gradual recovery in the automotive and renewable energy segments,” he said.
Leong further added that none of the companies under the research house’s coverage delivered negative surprises during this quarter.
BIMB Research said the second-quarter 2026 earnings season was largely in line with its expectations, with results across its coverage universe comprising one above, six in-line, and two below expectations.
The research house said Vitrox Corp Bhd was the sole positive surprise, with core net profit (CNP) surging 147.9% year-on-year (y-o-y) and 30.1% quarter-on-quarter (q-o-q) thanks to stronger-than-expected machine deliveries across both its automated board inspection and machine vision system segments.
“More importantly, management is targeting to achieve RM360mil to RM402mil revenue for the upcoming quarter, pointing to an even stronger quarter ahead and suggesting that growth momentum is accelerating,” the research house said in a report yesterday.
BIMB Research said among the OSAT names under its coverage, results were generally in line except for Unisem (M) Bhd, which missed expectations due to a slower-than-expected ramp-up.
Nonetheless, the research house viewed this as a timing issue rather than a deterioration in fundamentals, with earnings recovery still expected to be back-end loaded into the second half of financial year 2026 (2H26).
“Malaysian Pacific Industries Bhd reported CNP growth of 34.2% y-o-y, while Inari Amertron Bhd’s earnings declined 11.7% y-o-y, but rebounded strongly by 59.9% q-o-q on improving radio frequency (RF) loading volumes ahead of upcoming smartphone launches.
“We turn optimistic on Inari as we believe the group is entering a multi-year growth phase driven not only by RF recovery, but also the scaling of photonics that are well aligned with the rapid expan- sion of AI and DC infrastructure,” BIMB Research said.
The research house said the AI bubble is not bursting yet and that the AI infrastructure buildout looks less like a temporary boom-and-bust cycle and more like a permanent, multi-decade structural shift in the global economy.
“We believe the AI infrastructure boom is far from over, as hyperscalers continue to expand capacity while the pursuit of more capable AI models fuels ongoing upgrades across servers, networking equipment and DCs.
“While brief market pauses and sentiment-driven dips are to be expected, the primary indicators of a structural downturn such as budget cuts, overcapacity in DCs, or falling semiconductor demand have not materialised yet.”
BIMB Research upgraded its stance on the technology sector to an “overweight” from “neutral”, as earnings quality remains solid with healthy order backlogs extending into 2H26.
The research house’s top picks for the sector include Inari, which it has a “buy” call on with a target price of RM2.90.
Meanwhile, BIMB Research sees an opportunity to accumulate Dagang Nex-change Bhd.
The research house has a “hold” call on the stock with a target price of 55 sen, following its recent share price correction.
