Not all software stocks are equally exposed to AI disruption
Amid the AI carnage, the real opportunity is backing ASX tech companies with entrenched customers, regulatory moats and pricing power.
The ASX 200 Tech Index is down more than 20% this year. Over the same period, Anthropic shipped 20 product updates, including two frontier models and a desktop agent that controls your computer via your phone.
It would be easy to conclude from this that the tech sector was overpriced, vulnerable and about to be flattened by AI.
For some companies, that conclusion is probably right. AI can now generate thousands of lines of “beautiful” code a minute, resolve most customer support queries and produce marketing content that once required a five-figure monthly retainer. If AI can do what the software does, why keep paying for the software? A reckoning was always coming, especially for companies whose only real advantage was being a first mover.
But the sell-off has not been discriminating. Xero is down more than 30% despite first-half net profit rising 40%. TechnologyOne is down more than 20% despite upgrading its profit guidance. Companies that AI will strengthen have been marked down alongside companies it may eventually replace.
