Maybank Investment Bank has turned positive on the Malaysian technology sector amid improvement in the earnings outlook and rising exposure across the space to global AI and data-center (DC)spending.
The research house said in a note on Monday that the secular nature of the digitalization trend also continues to give a favorable backdrop for the software sector.
According to Maybank, AI/DC-related demand remains the primary growth driver into 2026, underpinned by sustained hyper scaler capital expenditure (capex), with domestic tech players including back-end names are increasingly seeing an uplift in AI demand
exposure.
“We continue to favor companies with direct leverage to AI/DC expansion, while less-exposed companies may see comparatively slower growth,” it said.
Maybank said its recent meetings with more than a dozen tech companies also point to a broadly positive read on the sector’s
outlook.
The dominant theme was the accelerating exposure towards the global AI/DC capex cycle, manifesting across test/automation equipment, power semiconductors, optical transceivers, and precision engineering services.
It also sees geopolitical-driven supply-chain localization is broadening beyond electronic manufacturing services (EMS), widening the investable opportunity set across the sector.
On subsector like automated test equipment/factory automation solutions (ATE/FAS), Maybank noted its second half demand remains underpinned by rising test complexity from advanced-packaged, power hungry, and leading edge AI chips, alongside trade diversion away from China.
Growing server demand is also driving automation and hardware testing needs across the supply chain, benefiting local ATE/FAS players.
The segment’s key risks, however, include components (eg. memory) and raw material shortages amplified by Middle East tensions, which are pushing up costs and straining delivery capacity where margin erosion is possible if these costs cannot be passed through.
As for outsourced assembly and test (OSAT), Maybank opined that OSAT players are benefiting from rising AI/DC-related demand for test and packaging services, particularly tied to power semiconductors (increasingly shifting from legacy segments like automotive to AI/DC applications) and optical transceiver technology.
That said, it remained cautious on downside risks from any potential slowdown in power semiconductors or optical transceiver demand, particularly given some of these names’ growth is concentrated among a small number of large customers.
Meanwhile, Maybank said local EMS space is facing a mixed outlook, and it expects this to persist in 2H26.
“Players are now facing cost-down initiatives, compounded by weak end-demand, component/raw material shortages stemming from Middle East tensions, and earlier USD weakness, all weighing on margins,” it said.
That said, it noted the sector continues to benefit structurally from “China+1/N” supply chain diversification where products extend towards AI/DC related electronics devices/components, with Malaysia’s neutral positioning remaining an attractive alternative manufacturing base for multinational corporations (MNCs).
“Into the second half, we expect operating conditions to stay challenging. We remain cautious on consumer electronics-focused EMS, which faces the steepest impact from weak consumer spending, shortened order visibility, and margin pressures,” it said.
As outlined in its earlier 2026 tech outlook, Maybank continues to see 2026 as a positive year for metal fabrication players, with momentum likely extending into the second half, underpinned by exposure to front/back-end equipment OEMs benefiting from strong AI/leading-edge chip capacity expansion.
However, it sees key risks mirror those in ATE/FAS, component and raw material shortages could erode margins if cost pass-throughs lag, while customer concentration remains a persistent risk across the sector.
As for engineering services, Maybank sees the segment rides on wafer foundries activities, with broader based exposure to the global AI and leading-edge semiconductor demand.
Maybank is also positive on the Malaysian software sector, underpinned by broad based digitalization trends, and its defensive buffer towards geopolitical uncertainties on account of its largely domestic/regional operational footprint.
It noted favorable national initiatives coupled with sustained demand continues to serve as the key catalyst for the sector.
According to the research house, the Malaysian software space demonstrated notable resilience throughout the first half of the year, with year on year earnings growth seen across the sector in the first quarter, attributable to sustained topline momentum.
Its optimism on the sector is also structurally anchored on favorable tailwinds stemming from broad-based digitalization trends, in line with the national push towards digital adoption.
The digitalization theme continues to be a central pillar of national economic policy, clearly demonstrated by its prominent positioning within Budget 2026 and the 13th Malaysia Plan, it added.
It also said the secular nature of the digitalization trend provides a favorable backdrop for the software sector.
“Strategic national initiatives coupled with sustained demand would continue to serve as the key growth catalyst for the sector. As such, we expect the software sector to remain resilient in the second half,” said the research house.
While earlier narratives centered around “Smart City” developments, Maybank noted that Malaysia has reached a critical juncture in its urban digitalization journey and is set to pivot to “AI Cities”.
It sees this strategic transformation serves as a foundational pillar towards Malaysia’s ambitions of being a leading AI City powerhouse in the region, the scope of which extends beyond just the adoption of new technologies towards a comprehensive transformation in urban planning with a focus on enhancing efficiency.
Despite the positive outlook, Maybank said the technology sector’s near-term headwinds warrant monitoring: USD/MYR fluctuations remain a concern for tech exports and component shortages, such as memory, could delay certain ramps and elevate costs.
“We expect software segment to maintain its growth trajectory, though any pullback on digitization initiatives could slow progress,” it added.