KUALA LUMPUR (July 7): Technology stocks and construction companies building data centres fell on Monday morning, following reports of a draft US rule that would restrict the export of artificial intelligence (AI) chips to Malaysia and Thailand.

At the closing bell, these stocks pared losses from intraday lows. Among technology stocks, Inari Amertron Bhd (KL:INARI) fell 1.44% to RM2.05, after dropping as much as 5.8% earlier. Gamuda Bhd (KL:GAMUDA), meanwhile, closed 2.75% lower at RM4.96, having fallen as much as 5.3% earlier.

The broader market ended lower, with the benchmark FBM KLCI falling 0.82% to close at 1,537.54.

The lack of clarity on the US’ trade policy also added to the pressure investors are facing just days away from the July 9 tariff deadline.

A draft rule from the US Commerce Department seeks to prevent China — to which the US has effectively banned sales of Nvidia’s advanced AI processors — from obtaining those components through intermediaries in Malaysia and Thailand, according to Bloomberg.

The rule has yet to be finalised and could still change, according to the newswire report published late last Friday.

The development triggered a knee-jerk reaction in construction and technology stocks, as the measures are still in draft form and many details remain unclear, Pheim Asset Management fund manager Khoo Zing Sheng told The Edge. “Should the most restrictive version of the policy be implemented, it may present a significant challenge to Malaysia’s ambitions in the AI and data centre space,” he said.

Meanwhile, Kenanga Investment Bank in a note to clients said: “Some of the positive sentiment that we have seen across some of the main data centre names we track could face some reversal risk, especially as a majority of them have seen further gains” since the repeal of Biden-era AI diffusion rules.

A delay in project executions due to the chip restriction would hit Sunway Construction Group Bhd (KL:SUNCON) the hardest, as nearly half of its data centre contracts are from non-US hyperscale data centre operators, the research house noted.

Further, there is now elevated regulatory uncertainty for NationGate Holdings Bhd (KL:NATGATE), which assembles high-end computer servers, the research house flagged. The stock plunged 14% to an intraday low of RM1.53 on Monday, before paring losses to close 8.43% lower at RM1.63.

Companies such as Gamuda, riding on the back of US-based tech giants and large-scale cloud service providers, may be less affected, Kenanga said. Gamuda has about RM2.7 billion or 7% of its outstanding jobs on hand tied to data centre projects.

RHB Research however highlighted a provision under the draft rule that would allow firms headquartered in the US and a few dozen friendly nations to continue shipping AI chips to both countries, without seeking a licence, for a few months after the rule is published.

“The licence requirements would still include certain exemptions to prevent supply chain disruptions,” allowing US-based tech giants such as Google and Microsoft to proceed with their planned data centre investments in Malaysia, the house said.

The Trump administration could also provide some form of validated end user (VEU) status, similar to former US president Joe Biden's AI diffusion rule, to US tech giants and allies which would allow them to ship AI chips more freely to countries like Malaysia, RHB Research added.

Read also:
US plans AI chip curbs on Malaysia, Thailand over China concerns — Bloomberg