AI capex cycle drives institutional inflows and gains for Singapore’s listed tech manufacturers

[SINGAPORE] The artificial intelligence boom has seen massive capital expenditure among tech giants with strong demand for chips globally – and Singapore’s listed technology manufacturers have benefited.

Data from Enterprise Singapore on Jun 17 showed that Singapore’s electronic non-oil domestic exports rose 94.8 per cent year on year (yoy) in May, supported by robust AI-related demand and driven mainly by integrated circuits, disk media products and PCs.

In the year to date, stocks within the local technology sector that focus on semiconductor equipment and testing, or AI-driven hardware, have mostly seen valuation expansions and net institutional inflows.

Hardware-focused technology small and mid-cap stocks – or SMIDs – with over S$1 million in average daily turnover have attracted more than S$680 million in net institutional inflows in the year to date.

These include constituents of the iEdge Singapore Next 50 indices UMS Integration , AEM Holdings and Frencken Group . Singapore-listed companies’ exposure to AI hardware is largely concentrated in precision components, systems integration and semiconductor equipment manufacturing.

UMS Integration has gained from the strong AI-driven chip demand worldwide, which has supported orders for deposition, etch and advanced packaging tools across memory and foundry chipmakers.

In a business update for the first quarter of 2026, the group reported a net profit of S$14 million, up 43 per cent on the year, amid 21 per cent revenue growth in its semiconductor business.

Similarly, AEM recorded a strong start to Q1, with revenue rising 35.8 per cent to S$116.9 million. The growth was driven by continued high-volume production deployments by a customer in the fabless AI and high-performance computing (HPC) space, as well as improving order activity from a PC and foundry customer.

The company also announced a strategic partnership with ASE Technology, the world’s largest outsourced semiconductor assembly and test player, to deliver next-generation AI and HPC test solutions, and unlock access to hyperscaler customers.

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AEM, which enters the iEdge Singapore Next 50 Index on Monday (Jun 22), has raised its revenue guidance for the 2026 financial year to between S$550 million and S$600 million. This represents an increase of 38 to 50 per cent from the previous year.

Meanwhile, Frencken’s Mechatronics Asia segment recorded revenue growth in Q1 on sustained demand from key front and back-end semiconductor equipment customers.

The group expects this momentum to continue, supported by active production programmes and new project wins, while Mechatronics Europe positions itself for a recovery in order flow from the second half of FY2026.

As at Jun 18, consensus estimates on Bloomberg showed that the analysts covering UMS, AEM and Frencken all have “buy” calls, with no “hold” or “sell” recommendations. Their average target prices for the stocks are, respectively, S$3.55, S$13.16 and S$3.33.

Beyond the Next 50 constituents, the other actively traded SMIDs that have benefited from the AI cycle include Micro-Mechanics and InnoTek .

Micro-Mechanics, which manufactures high-precision tools and parts for the semiconductor industry, reported an 18.8 per cent yoy rise in net profit to S$3.8 million for its Q3 ended Mar 31.

RHB Research analyst Alfie Yeo noted last month that the company’s growth outlook is positive, as most of its memory and chipmaker customers have orders extending into next year.

Higher global semiconductor production would also lead to greater overall demand for parts and consumables, which should be a boon for the company.

In 2025, InnoTek obtained “recommended vendor” status from Nvidia and IEIT Systems. It is now accelerating its foray into graphics processing unit (GPU) server-related products for the AI sector.

The precision metal components manufacturer commenced mass production for GPU server components in Q4 last year, with segment revenue contribution rising to S$43.2 million in FY2025, from S$35.6 million in FY2024.

However, this was offset by lower contributions from other business segments.

InnoTek is expanding its product pipeline, including exploring collaborations in liquid cooling systems, and expects the broadened pipeline to contribute positively to financial performance.

SAC Capital analyst Matthias Chan noted in an Apr 28 report that AI-optimised hardware requires a more robust mechanical design to support weight and thermal outputs.

This presents a significant margin expansion opportunity for manufacturers which can produce high-precision thermal components and systems.

Beyond the AI theme, space is another sector on investors’ radar – and satellite communications player Addvalue Technologies has ranked among Maybank Research’s top picks for small-cap tech stocks.

Addvalue’s revenue grew 59.9 per cent to US$24.8 million in the financial year ended Mar 31, driven by demand for space connectivity and advanced digital radio solutions.

Maybank Research analyst Jarick Seet highlighted that the company’s Inter-Satellite Data Relay System has secured US$15.2 million of orders in the year to date, compared with only US$4.2 million in H1 2025 and US$3.8 million in H1 2024.

“Besides AI, Addvalue is benefiting from two of the most exciting and highest-growth themes in the investment world: drones and space,” he added.

The brokerage expects “a rapid growth phase in the next few years after Addvalue’s turnaround in FY2025”. SGX RESEARCH

The writer is a research analyst at SGX.

For more research on Singapore stocks, visit: https://www.sgx.com/research-education/analyst-research.