AI investment slowdown clouds strong export outlook

Semiconductor exports continue to benefit from the global AI cycle.

A slowdown in AI investment could weigh on Singapore’s export outlook, despite raising its full-year non-oil domestic exports (NODX) growth forecast to 11.5% from 7.5%, according to RHB.

Whilst the ongoing AI investment cycle is supporting the electronics and manufacturing sectors, the bank cautioned that a sharp correction in AI-related markets could weaken global semiconductor demand and affect Singapore’s export-oriented economy.

“Given Singapore’s position within the global semiconductor value chain, this could weigh on exports, industrial production, and broader external demand," it said.

The bank revised its 2026 NODX growth forecast to 11.5% from 7.5%, supported by stronger-than-expected performance in the first half of the year.

Singapore’s NODX expanded 20.7% year-on-year in June, marking the tenth consecutive month of growth, although growth moderated from May’s 38.4% increase.

Electronics remained the main driver of export growth, rising 105.1% year-on-year (YoY) in June, led by disk media products (+170.9%), integrated circuits (+115.4%) and personal computers (+95.8%).

RHB noted the strength reflected continued AI-related investment and demand across the semiconductor value chain.

According to eToro market analyst Zavier Wong, Singapore’s export growth is becoming increasingly concentrated in chips, disk media and computers tied to data centre investment. He said spending by major US cloud providers on AI infrastructure continues to support demand for Singapore’s chip and hardware exports.

Wong, however, warned that other export segments, including gold, petrochemicals and specialised machinery, remain weak, leaving export growth vulnerable once global AI infrastructure spending begins to level off.

Despite the positive electronics outlook, RHB expects overall export growth to moderate in the second half of 2026 as non-electronics exports weaken.

Its in-house model projects NODX growth to slow to around 4.9% YoY in the second half, mainly due to weaker non-electronics performance.

Non-electronics NODX growth is expected to fall to around -12.0% YoY in the second half of 2026, after expanding 2.2% in the first half, amidst slower shipments of products outside the technology sector.

“We note that despite heightened geopolitical tensions in the Middle East, the global technology cycle and Singapore's electronics sector have remained largely resilient, with limited signs of disruption thus far,” RHB said.

“Hence, we expect Singapore’s electronics export momentum to remain well supported by the ongoing global tech upcycle and sustained AI-driven demand, which should continue to provide impetus to manufacturing output,” it added.

The bank highlighted strong export growth to key AI-related markets, including Taiwan (+278.2% YoY), the US (+228.9% YoY) and South Korea (+145.9% YoY), as evidence of continued demand transmission through regional supply chains.

However, RHB noted that Singapore’s growing exposure to the global AI cycle also increases its vulnerability to shifts in technology investment.

Whilst the city-state does not host major semiconductor firms such as Samsung Electronics, Taiwan Semiconductor Manufacturing Company (TSMC) or Broadcom, it remains a key supplier of integrated circuits, semiconductor equipment, and AI-related components.

Looking ahead, RHB expects electronics exports and manufacturing activity to remain supported by demand for semiconductor components, ICs, disk media products and PCs.

It also maintained its 2026 GDP growth forecast at 4%, whilst noting an upside bias if manufacturing momentum continues to outperform expectations.