The AI Illusion with Morgans Noosa
The artificial intelligence boom has spooked investors into treating every technology stock as a single, burning building. John Caruso learns that the smartest money in the room knows the difference between the smoke and the fire.
The share market has been spooked by artificial intelligence. But before you write off your technology stocks, it pays to know what you actually own.
Matthew Auger, Stockbroker and Partner at Morgans Noosa, has a Bill Gates quote he returns to often: We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.
It’s a useful antidote to the market hysteria that has recently gripped technology stocks since the beginning of 2026. If you’ve glanced at your portfolio lately and noticed some familiar names looking rather bruised, you’re not imagining it. Understanding what has shifted, and why, is the difference between panic-selling a quality company and recognising an opportunity.
Ask most people to name a technology stock and they’ll throw out the usual suspects. Microsoft. Google. NVIDIA. Xero. Realestate.com.au. In the popular imagination, they’re all the same animal, “tech”, lumped together under the one roof, rising and falling as a collective.
The trouble with that thinking is it’s wrong. And lately, it’s been costing investors their money.
“There’s an umbrella of technology stocks and then there’s all these subcategories underneath that can have a very different effect on each other,” says Matthew.
When AI exploded into public consciousness, the initial read was straightforwardly positive. Companies investing in AI infrastructure, data centres, cloud computing and chips, were rewarded. The logic was clean: AI is the future, and companies building the future are worth backing.
Then the sentiment flipped. The question that began haunting the market wasn’t whether AI would succeed, it was whether its success would destroy the very companies investors already owned.
The concern cuts to the heart of how the technology sector makes its money. Companies like Microsoft, Xero, and WiseTech don’t sell you a product once. They sell you a subscription. You pay to use their software year after year. It’s called Software-as-a-Service, and it turned these companies into the darlings of the share market: reliable, recurring revenue, predictable growth.
Now imagine AI can do what that software does. No subscription required. You simply ask.
“Will you need software when you can get AI to do it? That’s the concern with the likes of Xero for example. Will you need accounting software when you could get AI to generate a tax return?” Matthew asks.
The market’s verdict has been swift and, frankly, brutal. Microsoft, one of the most valuable companies on the planet, traded at USD$553 a share in late October last year. By early February it had fallen to USD$401. A 27.5 per cent haircut in barely three months, built almost entirely on fear of what AI might eventually do rather than what it is doing right now.
The same sentiment has rolled through the Australian market. Our homegrown online classifieds, realestate.com.au, carsales.com.au, and Seek, have copped a hiding on the theory that AI will make them redundant. Why use REA when you could simply ask an AI engine to find you a four-bedroom house with all the trimmings in Noosa Waters?
And hardware companies like NVIDIA, which makes the chips that power AI’s voracious appetite for computing, face a different kind of anxiety altogether, not that AI will replace them, but that the enormous sums being poured into AI infrastructure might slow, dry up, or simply prove to have been wildly overblown.
Three distinct categories of stock, three distinct sets of fears, all wearing the same “technology” badge. It’s no wonder investors are confused.
Here’s where Matthew pushes back against the prevailing gloom, not dismissively, but with the kind of measured confidence that comes from reading the results rather than the headlines.
“Morgans’ view is that AI is a boom, not a bubble. This sell-down in technology companies is an opportunity to buy good growth companies at a far more attractive price,” he says.
Take the online classifieds. The theory that AI will make realestate.com.au obsolete assumes that an AI engine can replicate what REA, Seek, and Carsales have, and it can’t.
“REA has a lot of internal data which makes it far more useful to consumers and to real estate agents,” Matthew notes. An AI model scraping the open internet for property listings is fishing in a shallow pond compared to the deep, proprietary databases these businesses have spent twenty-five years building. In the market, this is called a moat. These three businesses carry strong balance sheets and are well positioned to integrate AI as a tool rather than be consumed by it.
Software companies are a more nuanced call, but Matthew isn’t ready to write them off either.
“These very same companies are also using AI and adding it to their products,” he says. “Take WiseTech, the dominant global provider of logistics software, already investing in agentic AI to sharpen its offering to customers. Xero faces a harder road, but it manages the compliance-heavy business of talking to the ATO. I’m sceptical most people will trust AI with their tax affairs. Imagine telling the ATO your books aren’t in order due to AI.”
Then there’s the hardware end of the spectrum. NextDC, Australia’s leading listed data centre company, recently won approval for a new 300-megawatt facility in Horsley Park, Sydney, built to serve the hyperscalers. If the AI build-out continues, NextDC sits directly in the path of that demand.
The key question for all of this, Matthew acknowledges, is capital. Are companies like Microsoft and Amazon spending sustainably, or are they writing cheques their future earnings won’t be able to cover? For now, the answer favours the incumbents.
“The hyperscalers have massive cash flow that easily covers the amount they’re planning to spend. We think they’re perfectly capable of doing so,” he says.
That’s where the team at Morgans Noosa comes in. Technology stocks suit investors looking for growth rather than income, and they can be volatile when sentiment turns. The right approach depends on each client’s goals. For those who don’t want to pick individual names, exchange traded funds (ETFs) offer broad exposure across the sector.
For those who want to go deeper, Morgans carries research on individual Australian and international stocks.
“We keep a close eye on these companies,” says Matthew. “Especially in this environment, where what the actual business is doing and what the market thinks it’s doing can be very different things.”
What matters most is understanding what you’re buying when you buy “tech.” Software, hardware, and online classifieds are not the same bet.
They face different risks, carry different strengths, and right now they’re priced as though the damage ahead will be far worse than Morgans believes it will be.
The market, as it often does, has reached for a blunt instrument where a scalpel was needed.
Disclaimer: The advice in this story is of a generic nature. You should seek your own personalised advice before making any financial decisions.
