Artificial intelligence (AI) and data center-related demand is expected to remain the key growth driver for Malaysia’s technology sector in the second half of 2026, supported by sustained hyper scaler spending and a global semiconductor industry riding an AI-led investment boom, according to several research houses.
Maybank Investment Bank said in its recent report that artificial intelligence (AI)/ data center (DC)-related demand remains the key growth driver for Malaysia’s technology sector into the second half, underpinned by sustained hyperscaler capital expenditure (capex).
The research house expects most Malaysian technology companies to deliver results broadly within expectations. It continues to favor names with direct AI/DC leverage, while less-exposed segments may see comparatively slower growth.
Beyond AI/DC, Maybank highlighted three additional vectors: photonics and optical transceivers transitioning into a mainstream growth driver; fresh investment cycles in advanced cooling, test, and inspection solutions; and advanced packaging gaining local traction, representing a meaningful capability upgrade and potential re-rating catalyst for names that execute successfully.
With all the ongoings with regards to the Middle East conflict, Maybank also remains positive on software sector, given its largely domestic/regional operational footprint, which provides a defensive buffer against global geopolitics.
“Our optimism on the software sector remains intact, underpinned by structural tailwinds stemming largely from ongoing broad-based digitalization trends. Against this backdrop, coupled with sustained demand, we expect the software sector to remain resilient in the second half,” said the research house.
Maybank also highlighted that Malaysia has reached a critical juncture in its urban digitalization journey, with the narrative being decisively reframed from Smart City developments to AI Cities.
This shift marks a step towards enhancing city efficiency through the adoption of AI technologies, with the goal of positioning Malaysia as the leading AI City powerhouse in the region.
Meanwhile, Kenanga Research said in its recent report that the global semiconductor industry is entering a new phase of the AI supercycle, with market sales projected to exceed $1.5 trillion in 2026, and approach $1.9 trillion in 2027.
“Growth is expected to be driven by accelerating investment in AI infrastructure, HBM and advanced computing,” said the research house.
Unlike previous upcycles, which were largely led by recoveries in personal computers (PCs), smartphones and consumer electronics, it noted the current cycle is increasingly underpinned by structural AI capital expenditure, higher semiconductor content and greater value creation across leading-edge logic, memory and advanced packaging.
“Malaysia is positioned to participate in this transition through its established semiconductor ecosystem, although its exposure to higher-value advanced-packaging technologies remains relatively limited at this stage,” said Kenanga.
MBSB Research, however, is keeping its neutral view on Malaysia’s technology sector. The research house viewed that the fundamental of the semiconductor industry is turning more favorable due to the profound impact on AI.
This is also in-line with the monthly sales figure shared by global semiconductor sales which continues to make progress towards World Semiconductor Trade Statistics (WSTS)’ 2026 sales forecast of $1.5 trillion.
“At this juncture, we view that the AI-led revenue does not form the largest segment of total revenue. Nonetheless, we anticipate it will form a bigger chunk eventually,” MBSB said.
It also opined that the smartphone market continues to show heightened challenges, led by memory shortage and geopolitical tensions.
However, it viewed that Apple, Samsung and Huawei are in a better position as compared to their peers. There are also concerns on tariff and forex may impede the earnings performance, it added.
TA Securities also expects the positive momentum in the semiconductor market to be sustained, with AI-related demand continuing to serve as the primary growth driver.
According to the research house, in 2027, global semiconductor sales are expected to exceed $1.9 trillion, driven by continued investments in AI infrastructure and accelerated computing platforms.
In contrast, the outlook for traditional end markets such as PCs and smartphones remains more cautious, primarily due to the ongoing memory shortage.
Cited the International Data Corporation, TA said global PC shipments are expected to decline by 11.3 percent year on year in 2026, while global smartphone shipments are projected to fall by 13.9 percent year on year to approximately 1.1 billion units, marking the steepest annual contraction on record.
“Rising memory costs are expected to increase device prices, which could further weigh on consumer demand,” it added.
TA also highlighted that the implementation of Malaysia’s National Semiconductor Strategy (NSS) continues to gain traction, with the government making steady progress in strengthening the country’s position within the global semiconductor value chain.
Cited the Deputy Investment, Trade and Industry Minister Sim Tze Tzin, it noted the NSS has attracted MYR 59.9 billion ($14.69 billion) in semiconductor-related investments between January 2024 and September 2025, comprising MYR 56.8 billion ($12.93 billion) in foreign direct investment and MYR 3.1 billion ($760 million) in domestic direct investment.
It is noted that moving forward, the NSS will continue to focus on strengthening high-value technology segments, developing skilled talent, and fostering the ownership and commercialization of locally developed intellectual property.
A key strategic objective is to elevate Malaysia’s role within the semiconductor ecosystem by moving beyond traditional back-end activities into higher value front-end segments such as integrated circuit (IC) design and wafer fabrication. One notable initiative is the strategic collaboration with UKbased Arm Holdings plc, under which the government has recently awarded Arm design tokens to three local companies to accelerate and enhance their IC design capabilities.
In addition, the government has also allocated nearly MYR 2 billion ($490 million) under Budget 2026 for semiconductor-related development initiatives to support the comprehensive implementation of the NSS.
“We believe these initiatives will strengthen Malaysia’s semiconductor ecosystem, enhance domestic technological capabilities, and create greater opportunities for local companies to participate in higher value-added activities,
“Over the longer term, the NSS should help Malaysia move further up the semiconductor value chain, improve the sector’s global competitiveness, and position the country to benefit from the ongoing AI, advanced computing, and semiconductor investment cycle,” said TA.
Malaysia tech seen entering earnings-driven upcycle despite pullback risks – analysts