THE technology sector delivered a largely encouraging performance during the quarter two 2026 earnings season, with consumer EMS players being the notable exception.
Management teams across the sector also sounded more upbeat, providing greater clarity on demand prospects and capacity expansion plans that extend into 2027.
ViTrox, MI Technovation and UMS Integration stood out as the clear outperformers, with all three exceeding market expectations.
According to Hong Leong Investment Bank (HLIB), ViTrox and MI Technovation were particularly impressive, recording earnings beats for the second consecutive quarter.
Meanwhile, results and guidance from major global technology players provided further evidence that the current upcycle remains intact.
“In our view, the latest figures strengthen confidence in the sector’s earnings outlook over the medium term,” said HLIB.
Nvidia expects revenue to grow by 70% in 2028, which ends in January, and indicated that its growth is being held back by supply constraints rather than weaker demand.
Broadcom, meanwhile, expects revenue from its AI business to double in each of the next two years, driven largely by robust demand for custom chips from major hyperscale data-centre operators.
ASML is adding 30% lithography capacity for 2027, with a further 30% under evaluation for 2028.
Likewise, TSMC and the three major memory makers have raised capital expenditure (capex) guidance and continue to expand aggressively.
These commitments cascade through the entire supply chain, and are already visible in the forward outlook guided by Malaysian players, particularly those involved in equipment and precision engineering, optical and photonics, power semiconductors, and HDD-related, among others.
Underpinning this demand is the sheer scale of hyperscaler capex, set to reach USD800 bil this year before rising to more than USD1.2 tri in 2027.
However, the central debate on AI capex has never been about the spending itself. The hyperscalers have both the cashflow and the balance sheet capacity to fund it. It’s about whether the returns are sufficient to justify it.
“We would likely see more rotation within the sector, in favour of names with stronger earnings visibility and positive revision momentum that is not yet fully reflected in valuations,” said HLIB.
The research house therefore continues to prefer companies where earnings growth can outpace multiple expansion.
HLIB maintains their Overweight stance on the Malaysian technology sector, underpinned by the broadening semiconductor upcycle and sustained earnings momentum.
Their top picks for technology hardware are ViTrox, UWC, and SAM Engineering, given their stronger earnings visibility and positive revision momentum.
Separately, HLIB views the recent pullback in ITMAX as an opportunity to accumulate, as the weakness appears driven more by broader concerns around politically-linked stocks, while earnings delivery remains solid.—Sept 8, 2026
Main image: global-angle.com
