CIMB sees Malaysia AI monetization expanding beyond chip manufacturing
In a research note covered in a Wall Street Journal Market Talk roundup on Monday, Citi analysts said that Taiwan’s latest technology earnings confirm that the artificial intelligence infrastructure investment cycle remains in the early stages of a multi-year expansion. Semiconductor supply chain companies including Taiwan Semiconductor Manufacturing Co. (TSMC), United Microelectronics Corp. (UMC) and MediaTek have raised their guidance, increased capital expenditure or expressed improving visibility into AI demand stretching into 2027, the analysts noted. “Despite recent market turbulence, companies reaffirmed that AI investment cycle is broadening across the entire hardware ecosystem,” they wrote. The analysts added that AI beneficiaries will increasingly extend beyond computing to networking and power. They highlighted Delta Electronics as a key beneficiary, citing strong demand for high-efficiency power supplies, power distribution, liquid cooling and higher rack power density in AI data center products.
Separately, Citi analysts said that share prices of Chinese suppliers in the smartphone sector hinge on their second-quarter results and second-half outlooks. Apple’s latest earnings call suggests that supply constraints will increase significantly, with limited supply-chain flexibility in the September quarter, they noted. While memory costs are likely to continue to rise in the third quarter, costs on certain non-memory components could fall, the analysts wrote. Some first-half results of Chinese smartphone supply-chain companies could be “better-than-feared amid inventory build” ahead of the supply constraints, while pressure will likely increase in the second half.
In a separate note, CIMB Securities analyst Mohd Shanaz Noor Azam said that Malaysia’s exposure to artificial intelligence is expected to broaden, with more companies participating across different layers of the AI infrastructure supply chain. He expects AI monetization to expand beyond chip manufacturing into inspection equipment, advanced packaging materials, silicon intellectual property, and silicon photonics. He sees silicon photonics emerging as a key growth driver as expanding AI clusters drive demand for faster optical interconnects. He expects government support and industry collaboration to strengthen Malaysia’s integrated-circuit design and advanced packaging capabilities, supporting higher value creation. CIMB maintains an overweight rating on Malaysia’s technology sector, naming Vitrox and Malaysian Pacific Industries as its preferred picks.