Malaysia’s data centre project pipeline unaffected by alleged Nvidia chip breach, says MIDF

• MIDF also noted that not all data centres are built specifically for AI, even though many are AI-ready. For instance, YTL Power International Bhd (KL:YTLPOWR) had set aside 100MW for AI at its 500MW Kulai facility, but 80MW was later converted into colocation space due to rising demand.

KUALA LUMPUR (June 19): The pipeline of data centre projects in Malaysia is unlikely to be impacted by recent reports alleging that Chinese firms are using servers equipped with Nvidia chips to train artificial intelligence (AI) models, said MIDF Research.

Industry players and contractors remain actively involved in new tenders, with no signs of slowdown or delays in ongoing developments, the research house said in a note.

This includes Gamuda Bhd (KL:GAMUDA) selling 389 acres in Port Dickson to Google-linked Pearl Computing and securing a RM1.01 billion contract for data centre infrastructure works. Sunway Construction Group Bhd (KL:SUNCON) also secured a RM1.16 billion job from a US tech giant, while Microsoft reaffirmed its RM10.5 billion investment in cloud and AI infrastructure, including hyperscale data centres in the Klang Valley.

MIDF also noted that not all data centres are built specifically for AI, even though many are AI-ready. For instance, YTL Power International Bhd (KL:YTLPOWR) had set aside 100MW for AI at its 500MW Kulai facility, but 80MW was later converted into colocation space due to rising demand.

The Wall Street Journal recently reported that, in March, Chinese engineers travelled to Malaysia with suitcases of hard drives containing 80 terabytes of data to train AI models at data centres using Nvidia chips.

The move comes amid heightened US restrictions on China’s access to advanced chips for AI and data centre use, prompting Chinese firms to seek alternative access to high-performance computing.

In response, Malaysia's Ministry of Investment, Trade and Industry (Miti) said it is still verifying the news reports. Miti added that servers using Nvidia and AI chips are not classified as controlled goods in Malaysia, but the government is prepared to cooperate with any country that seeks assistance in monitoring sensitive exports under their respective control regimes.

Tech sector outlook positive beyond 2Q

Meanwhile, RHB Investment Bank (RHB IB) expects stronger growth in the tech sector beyond the second quarter of 2025, despite muted earnings in the first quarter.

This outlook is supported by a broader recovery across the semiconductor supply chain. Engineering support firms are already reporting solid revenue growth—seen as a leading indicator for a rebound in automated test equipment (ATE) players and outsourced semiconductor assembly and test (OSAT) providers.

RHB IB projects sector earnings to grow 2% year-on-year in 2025 and 40% in 2026, driven by healthy order flows, new product launches, and ongoing technology upgrades.

Despite some uncertainty stemming from US tariffs, RHB IB believes Malaysia remains well positioned to benefit from near-term order front-loading and longer-term shifts in global manufacturing, thanks to its robust ecosystem, skilled workforce, and strong infrastructure.

While excess inventory is a concern, it has yet to materially disrupt the sector's upcycle, the research house noted.

RHB IB maintained its ‘overweight’ call on the tech sector, with Malaysian Pacific Industries Bhd (KL:MPI) and Unisem (M) Bhd (KL:UNISEM) as top picks, citing their exposure to the chip sector recovery and new customer programmes.

Key downside risks include weaker end-demand due to tariffs, slower-than-expected orders, rapid technology shifts, and foreign exchange volatility.

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