- The tech sector declined in August
- Is AI reaching thematic bubble status?
- We take a look at the ASX tech winners for the month
Sentiment about rising stocks received a reality check in August as traders weighed the prospect of much lower growth in China.
At the end of the month, both the Nasdaq And ASX Info Tech (XIJ) The index was down 2%.
Despite the massive sell-off, Nvidia’s shares hit an all-time high due to revenue forecasts of US$16 billion next quarter (up from the current US$13.5 billion).
Nvidia is one of the primary beneficiaries of a wave of interest in “generative” AI, in which large companies want to stake their futures on AI. Many believe they will have to do so with Nvidia chips if they don’t want to fall behind the competition.
Google (Alphabet Inc) also hit a new 52-week high in August, reinforcing its remarkable stock price performance this year.
The increase came after Google unveiled a series of new AI products and partnerships in the last week of August aimed at equipping its enterprise clients with the latest AI technology.
AI adoption ‘occurs in waves’
The leading megacap tech names are undoubtedly in pole position to take market leadership roles in the emerging AI space.
However, according to Betashares’ Cameron Gleeson, there is still some way to go before they can take full advantage of their position.
“Once their models are developed and deployed, they will be adopted over time and drive revenue growth,” Gleason said.
Gleason believes demand for hardware like Nvidia’s chips will grow much faster than the technology’s more downstream applications.
“As a result, investors can expect adoption in waves rather than all at once,” he added.
Australian companies are at pains to highlight their AI credentials during the local earnings season, but the reality is that the story remains US-centric, at least for the moment, says Gleason.
Gleason says that while AI as a theme represents a good long-term investment, investors should have a properly diversified stock offering that can provide upside, as well as protection in the event of a short-term pullback in prices.
“Investors should not put their eggs in one basket and consider building a strong portfolio with diversified exposure to Australian and international equities, bonds and other assets – perhaps including our Nasdaq 100 ETF if they want high AI exposure.” Gleason said.
Australia lags behind in AI adoption
Josh Kannourakis, Barenjoy’s co-head of technology, told AFR that local investors would find it difficult to find pure play generative AI stocks on the ASX.
Beyond companies like data center providers, Kannourakis said NextDC (ASX:NXT)Many of the local companies bragging about AI may not be tech companies, but leveraging AI to improve their operations.
Gleeson agrees, we’re not there yet when it comes to generative AI.
“Despite claims to the contrary, Australia is largely an AI free zone,” he said.
“The true leaders in artificial intelligence are more likely to be found on the Nasdaq in the United States or the Nekkei in Japan.
“The reality is that Australian companies in the space are more likely to be disrupted by global leaders than join them,” Gleeson said.
Here are the top ASX tech winners for August 2023
On the ASX, data center stocks have risen in the past month due to high demand for their services. This is largely due to customers in various sectors emphasizing their AI capabilities.
Scroll or swipe to reveal the table. Click on titles to sort.
| code | name | Price | % change | Market Cap |
|---|---|---|---|---|
| 4DS | 4Ds memory | 0.2 | 368.75 | $276,605,306 |
| FGL | FRUGAL GROUP LIMITED | 0.0 | 72.73 | $18,165,178 |
| BVS | Bravura Solutions Ltd | 0.8 | 54.00 | $345,232,582 |
| Oak | Oakridge | 0.1 | 51.90 | $2,063,481 |
| ROC | Rocketboot | 0.1 | 50.00 | $3,579,235 |
| EML | EML Payments Ltd | 1.1 | 49.67 | $402,032,939 |
| AD8 | AUDINET GROUP LTD | 14.0 | 48.25 | $1,081,842,397 |
| EOL | ENERGY ONE LIMITED | 5.6 | 31.92 | $168,601,723 |
| DC2 | Dctwo | 0.0 | 31.58 | $3,267,902 |
| RKT | Rocketdna Ltd. | 0.0 | 30.00 | $6,406,711 |
| PPS | PREMIUM LIMITED | 0.7 | 28.57 | $333,707,119 |
| ALU | Altium Limited | 48.4 | 26.69 | $6,336,174,875 |
| DDR | DECKER DATA LIMITED | 9.9 | 23.38 | $1,599,858,087 |
| FCT | FirstWave Cloud Tech | 0.1 | 20.83 | $96,445,119 |
| 360 | Life360 Inc. | 9.3 | 20.70 | $1,792,419,140 |
| XPN | Xpon technology | 0.1 | 19.57 | $8,719,014 |
| MP1 | MEGAPORT LIMITED | 12.0 | 18.04 | $1,875,615,472 |
| ODA | Orcoda Limited | 0.3 | 17.86 | $57,513,403 |
| SPZ | Smart Parking Ltd | 0.3 | 15.00 | $119,120,020 |
| DUG | DUG Tech | 1.8 | 12.85 | $206,125,309 |
| ACE | Acusensus Limited | 0.8 | 12.68 | $101,550,730 |
| Public Interest Litigation | Peppermint Inv Ltd | 0.0 | 12.50 | $18,340,712 |
| AHI | Advanced Health | 0.2 | 12.00 p.m | $46,806,353 |
| HYD | HYDRIX LIMITED | 0.0 | 10.71 | $7,880,784 |
| BCC | Beam Comms | 0.2 | 10.26 | $20,309,151 |
| AR9 | ARCTIC LIMITED | 0.1 | 10.00 | $29,985,935 |
| FBR | FBR LTD | 0.0 | 10.00 | $78,139,757 |
| RDY | Readytech Holdings | 3.6 | 9.39 | $400,702,782 |
| W2V | Way2Vatltd | 0.0 | 7.69 | $8,162,346 |
| 1CG | One Click Group Ltd | 0.0 | 6.25 | $10,452,967 |
| NXT | NEXTDC LIMITED | 13.5 | 6.20 | $6,860,239,658 |
| RWL | Rubicon water | 0.7 | 6.06 | $120,319,573 |
| no | Norwood Systems Ltd. | 0.0 | 6.06 | $14,508,647 |
| DSE | Dropsuite Ltd | 0.3 | 6.00 | $183,575,771 |
| NVX | Novonics Limited | 1.0 | 5.91 | $539,452,182 |
| XF1 | Xref Limited | 0.2 | 5.26 | $35,373,495 |
| CDA | Coden Limited | 7.9 | 4.66 | $1,404,052,729 |
| HSN | Hanson Technologies | 5.5 | 4.58 | $1,094,494,672 |
| CXZ | Connection Telematics | 0.0 | 4.35 | $21,780,238 |
| OPL | OPIL LIMITED | 0.1 | 4.08 | $4,453,068 |
| ELS | Elsite Ltd | 0.3 | 3.33 | $45,095,874 |
| VIG | Victor Group Hldgs | 0.0 | 3.33 | $17,739,027 |
| COS | COSOL LIMITED | 0.8 | 3.05 | $137,680,702 |
| XRO | Zero Ltd | 125.1 | 2.36 | $18,594,904,654 |
| TYR | Tyro Payments | 1.4 | 1.43 | $729,200,753 |
| X2M | X2M Connect Limited | 0.1 | 1.00 | $8,018,964 |
| RUL | Rpmglobal Hldgs Ltd | 1.6 | 0.92 | $342,613,583 |
| CPU | COMPUTERSHARE LTD | 25.2 | 0.40 | $15,177,755,507 |
4DS Memory (ASX:4DS)
The 4DS continued its run on the back of its recent success, where it successfully incorporated its ReRAM memory cells into the Emek megabit array.
The company also certified that its 4DS interface switching ReRAM technology is transferable from fab to fab and demonstrated a fully functional megabit array.
Read now: 4DS is an Aussie semiconductor innovator. And this is the best day in memory
Frugal (ASX:FGL)
A retail intelligence company that analyzes grocery data is growing after announcing a new managing director.
The company announced in August that Kenny Wu, currently a non-executive director of Frugl, will take over as executive managing director effective immediately.
Wu is an experienced technology start-up entrepreneur with a proven track record.
For 10 years he served as the founder and managing director of Easy Plastics and Facilipack Industries, a manufacturer of disposable food packaging specializing in extrusion and thermoforming processes.
Bravura Solutions (ASX:BVS)
The wealth management software company grew despite reporting lower revenue and higher operating expenses in FY23.
The company told the market that this trading performance led to the need and urgency for change, which led to a new CEO, chair and refreshed board joining Bravura in the second half.
Independent non-executive chairman Matthew Quinn recently bought U$127k worth of BVS stock that also hit the market.
EML Payments (ASX: EML)
EML rose last month after revealing it had withdrawn guidance for FY23, with revenue of $254.2 million (up 4% on the highest tier estimate provided by the market), resulting in underlying EBITDA of $37.1 million.
The bottom line is less spectacular, but EML says it still posted a statutory net loss after tax of $284.8 million, driven by $258.9 million after tax impairments from the PFS Group and Centennial acquisitions.
Audinet (ASX:AD8)
The audio visual solutions company posted record revenue growth and profit during the year.
Revenue on pcp rose 40% to US$46.7 million.
Bottom line EBITDA was $11 million in FY22, up 156.4%.
The company posted a pre-tax net profit of $1.4 million in FY22 against a loss of $4.4 million.
Energy One (ASX:EOL)
The energy-focused technology company took the plunge after announcing it had received a non-binding offer from global investment firm STG.
STG wants to buy EOL for $5.85 per share in cash. The stock is currently trading at $5.36.
Dicker Data (ASX:DDR)
The data center company reported first-half revenue of $1.107bn, up 5.3% on pcp.
Bottom line NPAT of $54.1m was up 7.8% on pcp.
Dicker says the highly diversified nature of the company’s vendor and technology portfolio allowed it to offset declines in other divisions.
But CEO David Dicker admits the current market is challenging.
“We performed well in the first half of 2023. Despite a challenging market, overall sales exceeded 9% even as traditionally strong segments, such as appliances, declined.”
Next DC (ASX:NXT)
The data center stock reported that revenue came in above guidance, up 25% to $362.4 million.
Underlying EBITDA was up $24.6 million, up 15% on pcp.
Looking ahead to FY24, NXT says total revenue is expected to be between $400 million and $415 million (compared to FY23 of $362.4 million).