Seeking value in Malaysia’s tech rally

IT is always a challenge for investors to follow Malaysia’s tech sector on Bursa Malaysia.

Early investors in companies like ViTrox Corp Bhd, Pentamaster Corp Bhd and Malaysian Pacific Industries Bhd – which today trade at lofty valuations – have nothing to complain about.

But what about those wanting to invest in the sector today?

The first question is whether to buy into such highly valued tech stocks. Is there still upside?

There could be, especially if you are a believer in the artificial intelligence (AI) craze.

The good thing is that some clarity on the AI scene should come about soon, with the launch of Anthropic’s public prospectus in the United States.

This is the company behind Claude.

AI business models are still relatively untested, and Anthropic’s filing will be the first read for investors on the monetisation of frontier AI.

The golden question here is whether frontier AI companies can turn strong demand for AI into durable, profitable businesses – or are they spending even more money to generate that revenue?

Another theme that tech stock investors should be looking at is photonics, a key technology for overcoming bandwidth, power and heat constraints in AI data centres.

The key thing here is determining where local tech companies sit within the silicon photonics value chain and how much value they can capture as the technology scales.

Pentamaster, for instance, is betting on this technology through a joint venture to develop submicron silicon-photonics interconnects for high-speed connectivity in AI servers.

The group is developing prototypes for potential customers, including major AI chipmakers, and expects mass production to begin in 2027. It is a potentially lucrative market.

Pentamaster estimates that the silicon-photonics interconnect market could grow from US$2.65bil in 2025 to US$9.65bil by 2030, representing a compound annual growth rate of 29.5%.

Other local players are also positioning themselves along the silicon photonics value chain.

Inari Amertron Bhd, for instance, is involved in the assembly of optical modules, while EG Industries Bhd handles PCBA and box-build assembly for high-speed optical transceivers.

Hence, there could still be further upside for the tech sector, but investors must identify which companies are moving up the value chain and are best positioned to convert these emerging opportunities into sustainable earnings.