ASX-listed tech sector shouldn’t bank on AI boom, says Barrenjoy

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NextDC Chief Executive Craig Scrooge said last week that data center developers are in early conversations with customers to address their infrastructure needs for generative AI, which has yet to be included in the company’s revenue guidance.

Another feature of the earnings season is the volatility of technology stocks, said Ellis Kennedy, head of Australian technology research at Jordan. Share prices rose as much as 30 percent as companies announced results for the 12 months to June 30 and guidance for the year ahead.

“These tech stocks have a high beta for a reason, or in layman’s terms, they expect to go up as fast as they can go down,” she said. “Because of the sell-off, the tech sector then rebounded from the market, with big stock moves on the distribution of impact on good or bad guidance.”

WiseTech Global, a provider of freight software, was one of the biggest movers, as investors erased $5.6 billion from its value after it said its purchases of Envas Technologies and Bloom Global would squeeze margins.

Despite interest in generative AI, data services company Appen fell another 32 percent after the company’s turnaround plan failed to offset declines in its core business. Shares in financial software and data firm Iress fell 36 percent on concerns about a lack of growth, rising costs and its balance sheet, while IT solutions group Data#3 fell 19 percent.

Altium, which makes software used by electronics designers, was the biggest positive surprise to analysts and investors. Shares have risen more than 30 percent since the results were announced.

Barenjoy’s Mr. Kannourakis said Altium’s recent success in the enterprise segment, including selling software licenses to companies including Tesla, increases its addressable market and potential revenue pool.

“A key feature of this result was Altium’s acceleration in selling high-value commercial and enterprise licenses, with these users growing 76 percent year-over-year versus 7 percent overall subscription growth. This trend has increased average revenue per user by 22 percent and is likely to continue.”

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