Australian tech stocks have experienced a significant downturn, driven by fears that artificial intelligence will disrupt established business models. WiseTech Global, a logistics software company that provides software solutions for the logistics industry, suffered a 13 per cent share price drop following concerns sparked by a US company, Algorhythm Holdings, which claimed its AI platform could significantly increase freight volume efficiency. Algorhythm, formerly a karaoke machine company, issued a press release highlighting its AI capabilities, unnerving investors and triggering a sell-off in freight and logistics stocks.
This wave of selling extended beyond freight companies, impacting commercial real estate and other software businesses. REA Group, Xero, and Pro Medicus all experienced substantial share price declines. Pro Medicus, a radiology software company providing medical imaging software, fell sharply after earnings missed expectations, exacerbating existing concerns about AI’s potential to displace current technologies.
Analysts suggest that investors are overreacting to the perceived threat of AI, ignoring the advantages that incumbent companies possess, such as established relationships and regulatory compliance. Despite the concerns, some analysts believe that companies like Pro Medicus and WiseTech are well-positioned to leverage AI to enhance their platforms. Citi maintains a buy rating on WiseTech, suggesting the company is best placed to integrate AI into its operations.
However, investors appear to be favouring a ‘sell first, ask questions later’ approach, rotating away from capital-light tech business models towards hard assets and established, regulated moats. This shift, combined with concerns about liquidity and broader economic uncertainties, has created a challenging environment for Australian tech stocks.
