MIDF Research said the emergence of DeepSeek was a factor that could moderate the impact of the AI chip restrictions imposed by the outgoing Biden administration, it said in a note today.
It attributed the recent market volatility to external factors such as the AI chip restrictions and concerns surrounding the Stargate initiative, a US$500 billion (RM2.2 trillion) plan backed by Microsoft and Meta to expand data centres (DC) in the US.
The research house said while these developments may have rocked market confidence, fears about the country’s diminished role in the global DC market appear to be overstated.
DeepSeek’s AI model is reported to have achieved ChatGPT-level performance with a fraction of the advanced Nvidia chips required by other AI models. Its recently launched free AI assistant has overtaken US rival ChatGPT in downloads from Apple’s app store.
This prompted global investors to dump US tech stocks earlier this week, wiping US$593 billion (RM2.6 trillion) off Nvidia’s market value in a record one-day loss for any company on Wall Street. The Silicon Valley giant designs most of the pricey semiconductor technology powering the AI revolution.
MIDF said if DeepSeek’s efficiency claims prove valid, US companies would be able to achieve the same processing power using significantly fewer graphics processing units.
This could support the expansion of DCs in Malaysia or enable existing facilities to scale up, offsetting potential disruptions caused by AI chip limitations, it added.
“If efficiency truly increases, Malaysia could see a shift towards lower-value yet higher-frequency DC projects, which could impact revenue projections for major contractors,” it said.
Not solely reliant on AI chips
MIDF also pointed out that the DC sector is not solely reliant on AI chips.
It noted that DCs serve various functions such as providing resilience against natural disasters through geographically distributed infrastructure. For example, a backup DC in Malaysia could mitigate service disruptions if an undersea fibre-optic cable connecting a US DC fails.
These factors underscore Malaysia’s long-term attractiveness as a DC hub, regardless of fluctuations in AI chip availability, it argued.
Moving forward, MIDF said the construction sector’s long-term strength is intact, bolstered by strong job flows, ongoing mega infrastructure projects and sustained private-sector investments.
It added that key government initiatives, such as the Johor RTS Link and Penang LRT, will provide further support for the sector.
Construction and utilities stocks such as Sunway Construction Group Bhd (SunCon), YTL Power International Bhd, and Gamuda Bhd surged last year as data centre investments ramped up, prompting investors to grab counters linked to DC projects.
However, the data centre highflyers have come crashing down since the start of the year, with many seeing over 20% decline in their share prices year to date (YTD). SunCon’s shares have tumbled 25.5%, YTL Power (-28.7%) and Gamuda (-14%) YTD.
Property developers with DC projects have also fallen this year including Mah Sing Group Bhd (-20.7%), Eco World Development Group Bhd (-18.2%), and Sime Darby Property Bhd (-12.9%).
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