Market Review

MY: The local bourse ended the day on a negative note as global optimism over Nvidia's stellar earnings was offset by concerns over stubborn US inflation. Sector-wise, Construction (+1.29%) outperformed, led by GAMUDA and SUNCON, while Transportation (-0.90%) lagged the most.

US: Wall Street closed higher on Thursday, brushing off US inflation worries as Nvidia’s blockbuster earnings and a sharp rally in enterprise software stocks reinvigorated enthusiasm for the artificial intelligence trade. The Dow, S&P 500, and Nasdaq advanced by 0.2%, 0.7%, and 1.6%, respectively.

The Day Ahead

US: Following Nvidia’s strong Q2 results and forward guidance that obliterated consensus models, the rebound on Wall Street is expected to sustain, with buying interest anticipated to flow towards AI networking and infrastructure peers. These include high-speed optical and networking infrastructure providers Arista Networks (ANET) and Lumentum (LITE), which will benefit from Nvidia’s record GPU shipment volumes, as they directly translate into accelerated DC switch demand. We also continue to favour Micron Technology (MU) following its partnership with Google to design and produce custom, application-specific AI accelerators. Cybersecurity companies like Palo Alto Networks (PANW) and Fortinet (FTNT) also traded higher following strong demand for AI-driven security products and recent earnings beats.

MY: Tracking Wall Street’s positive overnight performance, the FBM KLCI is expected to trade on a stronger footing, particularly the technology sector. Stock-wise, we continue to favour (i) SKYECHIP, supported by its ongoing strategic partnerships, including custom interface IP design with Cerebras Systems for wafer-scale AI platforms and design-token access expansion with Arm Holdings; (ii) THMY, which is experiencing surging demand for AI and DC automated-testing solutions alongside its factory expansion in Penang; and (iii) DNEX, which is expected to see higher ASPs and additional production capacity for its silicon photonics products.