The recent volatility in Malaysia’s construction sector, particularly in shares such as Gamuda and SunCon, stemmed from fears over the Biden administration’s AI Chip restrictions.
“This policy prohibits US data centre (DC) operators from deploying more than 7% of their processing capacity in Tier 2 nations such as Malaysia and limits GPU usage to 50,000 units per facility, raising concerns that large-scale DC investments in Malaysia would stagnate. However, we believe these concerns may be exaggerated. Malaysia is an ideal location for data centres due to its ample electricity and water resources, cost benefits, and established infrastructure,” according to MIDF (Malaysian Industrial Development Finance) Researcher in its latest Sector Report.
Beyond AI, data centres rely on more than just AI chips. The industry includes cloud-based and AI-based data centres, each serving a particular purpose.
Some are on-site for quick accessibility, while others are backups to maintain resilience against natural calamities. Strategic location is crucial because geographically spread data centres improve latency and bandwidth, ensuring service continuity.
For example, if an undersea fibre-optic connection linking a YouTube DC in the United States fails, viewers may lose access unless YouTube has a backup DC in Johor Bahru. These elements strengthen Malaysia’s long-term appeal as a DC centre.
As more detail emerges, confidence in construction stocks is expected to recover in the following months, bolstering the sector’s long-term strength.
If efficiency improves, Malaysia may shift toward lower-value, higher-frequency data centre projects, affecting revenue predictions for large contractors. This is an important issue to monitor in the future.
“We maintain our positive view on the construction sector as the softening steel bar prices continue to ease cost pressures while cement prices remain stable, providing a supportive pricing environment for contractors,” commented MIDF.
MIDF feels that the market reaction to the AI Chip restriction, the Stargate effort, and the Deepseek advancements may have been overdone.
Malaysia remains a prominent data centre hub due to its strategic position, accessible resources, and cost advantages, with industry input indicating no significant impacts on forthcoming developments.
The MIDF predicts a recovery in construction stocks, fueled by strong job growth, massive infrastructure projects, and ongoing private sector investments in data centres and other government-related infrastructure projects such as the RTS Link in Johor, the Penang LRT, and others.
Source: Focus Malaysia
