KUALA LUMPUR (Nov 10): The Democratic sweep of both US congressional chambers in the midterm elections has weighed on technology stocks globally, but analysts said Malaysian tech faces a sentiment and valuation dip rather than an earnings hit.
MBSB Research said a blanket negative view of Malaysian technology would be "inappropriate", since impact depends on each company's exposure.
The exposure, it said, ranges from AI servers and data-centre equipment to semiconductor testing, consumer electronics, capital-equipment orders, customer concentration and balance-sheet strength.
"Tighter regulation does not remove the physical requirements of AI. AI still requires electricity, grid connections, buildings, cooling systems, water treatment, fibre networks, cybersecurity and backup power. Even a more regulated industry must continue investing in secure and efficient infrastructure," said the house in a note on Tuesday.
Meanwhile, Kenanga Investment Bank said the post-US midterm unease has dragged Malaysian tech names down by sentiment, and that for the sector, it foresees "a sentiment and valuations dip rather than earnings" from delayed data-centre rollout.
Kenanga views any shift of data-centre development outside the US — such as Meta eyeing overseas expansion — as "a modest positive for Malaysia," likely extending the visibility of the local data-centre play rather than accelerating demand.
It also noted Google's commitment to spend US$15 billion in Malaysia over 2027/2028.
MBSB said the near-term Malaysian transmission is primarily through sentiment, with Bursa Malaysia technology companies exposed to Nasdaq and semiconductor valuations, and warned that "US policy risk becomes Malaysian valuation risk before it becomes Malaysian earnings risk".
MBSB's preferred durable exposure is in the physical infrastructure surrounding data centres, including Tenaga Nasional Bhd (KL:TENAGA), YTL Power International Bhd (KL:YTLPOWR), Gamuda (KL:GAMUDA), Sunway Construction Group Bhd (KL:SUNCON), IJM Corporation (KL:IJM), CelcomDigi Bhd (KL:CBD) and Maxis Bhd (KL:MAXIS).
Kenanga cautioned that local barriers are also tightening, with 24 applications for approval on hold pending power and water checks, and that 12.3GW of energy capacity had been approved for data centres as of August, with maximum sector demand projected to reach 8.39GW by 2030.
Kenanga said YTL Power and property names are "unduly discounted" for their data-centre prospects — YTL Power's last close of RM5.01 implies only 600MW of its pipeline is being credited versus its 1.2GW forecast.
Meanwhile, data-centre valuations account for 7%–14% of target prices for Sime Darby Property Bhd (KL:SIMEPROP), EcoWorld Development Group Bhd (KL:ECOWLD) and Mah Sing Group Bhd (KL:MAHSING).
It likes Tenaga Nasional, seeing the discount implied by skepticism over the IBR mechanism as excessive, and Kee Ming Group Bhd (KL:KEEMING) as a beneficiary of data-centre-related electrical works, with Sunway Construction as its preferred pure-play data-centre exposure.
On technology, Kenanga remains positive on Nationgate Holdings Bhd (KL:NATGATE) and Ambest Group (KL:AMBEST) and likes Kelington Group Bhd (KL:KGB) for its secured 2027/2028 revenue, but said it does not yet see urgency for bargain hunting for tech names sector-wide.
Both houses expect Malaysian equities to remain supported by resilient domestic growth, healthy corporate earnings and continued infrastructure and data centre investment.
MBSB kept its preliminary end-2027 FBM KLCI target at 1,850 points, based on forecast index earnings of 120.1 points (6.6% growth) and a forward PER of 15.4 times.
Both houses favour a balanced approach — utilities, construction, telecommunications, healthcare and essential consumption alongside selective technology.
MBSB noted further that lower oil prices would provide the necessary market confirmation for its 1,850-point target.