Across three weeks of Switzer Investing TV, four professional investors have arrived at the same conclusion: the AI sell-off in Australian tech has gone too far. But there is one who disagrees. Who’s right?
Australian tech stocks are mispriced. That, at least, is the increasingly common view among the fund managers and analysts coming through Switzer Investing TV in recent weeks. Four of them, across three episodes, have made variations of the same call. The AI-disruption narrative driving the sell-off in names like Xero, WiseTech, Pro Medicus and TechnologyOne has run ahead of the evidence. The recovery, when it comes, will reward investors who position before institutional money rotates back.
The names making this case are Rudi Filapek-Vandyk of FNArena, Jun Bei Liu of TenCap, Julia Wang of Paradise Investments, and the Switzer Report’s own Paul Rickard. While their reasoning differs, their conclusion does not.
The rotation has overshot
Rudi Filapek-Vandyk, founder of FNArena, made the structural argument first. His view is that the rotation out of quality growth and into commodities and energy that has dominated the past year was driven by a market focused on inflation. As that focus shifts, the conditions that punished tech reverse.
“Everyone is now piling into energy stocks and mining stocks because they protect you against inflation. And the bond market is focused on inflation,” he said. “I think the longer this continues in the Middle East, the longer we have no solution, the longer the interruption to the oil price, the more likely the market will switch its focus away from inflation towards growth.”
His case study is TechnologyOne, the only major Australian tech name to have already followed the recovery template he is now anticipating across the sector.
TechnologyOne (ASX: TNE)
TechnologyOne fell from above $44 to around $20 in the broader sell-off, before recovering to around $30 after management came to market with stronger guidance and confirmation of an AI-embedded product launch. Rudi’s reading is that this is the playbook every other quality tech name now needs to follow.
“TechnologyOne gets sold down with everything else. Share price goes back towards twenty dollars. It was more than forty four at one stage. And then management comes out and basically says to the market, listen, we are actually going faster than we thought previously. We are going to make our targets. We are buying in shares, and we are the first company in Australia to successfully launch an AI embedded suite of products. The market went, fair enough. All right. You’ve convinced us. Back to thirty dollars.”
Quality at pre-COVID prices
Jun Bei Liu, founder of TenCap, made a parallel argument from the healthcare side of the same quality cohort. Her view, given a week before Wang and Rickard appeared, was that the broader sell-off had pushed quality names back to multiples not seen since before the pandemic.
Cochlear (ASX: COH)
Cochlear fell more than an eye-watering 35 per cent in a single day on its profit warning. Liu’s view is that the reaction was disproportionate to the news, and that the resulting price now offers a multi-year entry point.
“Actually I think if I look forward twelve month, Cochlear will be the one to buy,” she said. “It will be better. It’s at a price that’s never seen before. And actually all worse than Covid times. So this is a company I would buy long track record thirty years right, forty years of execution. I think that looks really good.”
SaaS won’t be replaced by AI
Julia Wang, portfolio manager at Paradise Investments, made the most direct case against the AI-disruption narrative on her debut appearance this week. Her position is that the evidence from the SaaS companies themselves contradicts the thesis the market has been pricing.
“I think the market’s just sell on the basis of fear,” she said. “What we’re hearing from the companies and seeing from the evidence is, these SaaS companies are not hiding under a rock. They’re using AI as a tool. You actually saw Atlassian grow seat numbers more than the market expected, which is completely the opposite of the narrative.”
Asked which Australian names she sees as best positioned to follow the same pattern, she pointed to the industry-specific SaaS players whose moats are built on domain expertise rather than generic code.
WiseTech Global (ASX: WTC)
“Those sort of companies where they’re very industry specific,” Wang said. “So for example, WiseTech services a logistics company. You need to have industry expertise. And not just coding.”
Xero (ASX: XRO)
Paul Rickard, co-founder of the Switzer Report, made the institutional-money argument on the same episode. His angle is different – he is reporting on what professional investors have done, rather than making a personal call. The observation that gives the piece its sharpest framing is on Xero specifically.
“In case of Xero, this was the same company less than twelve months ago,” he said. “Institutions were loving at one hundred and seventy six dollars. So it’s hard not to see what’s really changed in the last twelve months. You know why it’s down eighty or eighty two dollars.”
Rickard’s broader point is that the catalyst for the rerating is missing rather than absent. Institutional money will return, in his view, but only after a major Australian SaaS name reports a clean earnings number with confident forward guidance. The companies have to convince the market, one at a time, before the rotation back can begin.
The dissenting view
Not every voice on Switzer Investing TV agrees. Mike Gable, founder of Fairmont Equities, appeared on the same episode as Wang and Rickard and made the opposite case. His view is that the AI-disruption narrative is indeed overdone, but that this is not the reason the tech sector will keep falling.
Pro Medicus (ASX: PME)
“This whole thing about AI risks and SaaS apocalypse, I think that’s a bit of a red herring,” Gable said. “The real issue is, we’re moving from a period in time where we had a very predictable world. We had low interest rates, low volatility. We’re moving into a more uncertain environment. And I just don’t think big investors want to pay up whatever PE these things trade at for in an uncertain world.”
His call on Pro Medicus is that it heads to about $100, well below current levels, before any base forms. Xero, on his read, is still trending lower. Seek is the worst chart of the three. The point Gable is making is that the bullish camp has identified the right catalyst – the AI fear was overdone – but is wrong about what happens next. Without the macro setup that supported high-multiple growth in the first place, even quality compounders struggle to recover their old multiples.
The point all four bullish voices agree on is that something’s gotta give, as they say. And soon it probably will: the next reporting cycle will see WiseTech, Xero, TechnologyOne, Pro Medicus and Aristocrat Leisure all hand down results.
Rudi Filapek-Vandyk’s argument is that whichever of those names follows the TechnologyOne template (strong numbers, confirmed guidance, an AI-as-tool product story) becomes the trigger for institutional money to start rotating back into the sector.
The dissenting case is that one good earnings print is not enough. The macro setup has to change for the multiples to recover, and on Gable’s reading the macro setup is moving in the opposite direction. Both sides are looking at the same set of stocks. Both sides are watching the same earnings calendar. The next two months will tell us which side was right.
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