Malaysia's AI boom moving beyond data centres: Rakuten Trade research head

KUALA LUMPUR: Malaysia's artificial intelligence (AI) investment story is expanding beyond data centers, according to Rakuten Trade. While Johor has become a major data-center hub, the broader AI-linked industrial ecosystem is spreading across several states, particularly those with established semiconductor and manufacturing capabilities. Penang, for instance, generated 48.9% of Malaysia's total exports in June 2026, far surpassing Johor's 17.6% share, as reported by the Statistics Department.

A significant portion of Malaysia's exports, 48.2%, comes from the electrical and electronics sector, emphasizing its importance in the AI landscape. Rakuten Trade's Kenny Yee, head of research, emphasizes that Malaysia's AI story should not be limited to data centers alone. Instead, the next investment opportunity may lie in companies providing equipment, components, and automation necessary for building the wider AI ecosystem.

This shift aligns with Malaysia's existing strengths in semiconductor and manufacturing. Recent projects in Malaysia include semiconductor wafering, advanced power modules for AI data centers, and specialized semiconductor components, with companies like ViTrox and AIXTRON reporting increased earnings due to the surge in semiconductor demand driven by AI applications.

Additionally, AIXTRON is investing RM200 million in a manufacturing and engineering center in Penang, focusing on metal-organic chemical vapor deposition technology, while MKS has opened its Supercentre Factory in Penang to meet the rising global demand for wafer fabrication equipment.

Yee highlights that this development indicates investors may need to shift their focus from companies building or operating data centers to the wider supply chain, encompassing semiconductor equipment, automation, inspection systems, advanced packaging, and specialized components. He stresses that the key for investors is not just identifying where investment is being announced but rather determining which companies can convert that demand into consistent orders, revenue, and earnings.

Nevertheless, the sector faces risks such as a slowdown in AI-related capital expenditure, semiconductor cyclicality, customer concentration, and trade restrictions.