Chart of the Week: ASX tech valuations at three year lows
The valuation gap widens in Aussie tech.
This week’s insights come directly from our equity research team in the Australian Market Outlook Q4 2026.
Tech sector valuations dwindle
The technology sector has been highly volatile in recent months. It rallied at the start of the reporting season, but gains were soon lost.
While profits and guidance for next year did not reflect the “SaaSpocalypse” narrative gripping the sector since February, the strength was not enough to assuage fears and pessimism.
Australian technology sector has lagged US counterpart by close to 40%
The Australian technology sector is now severely lagging its US counterpart year-todate, where “SaaSpocalypse” fears have been mostly relegated to memory lane, as hype around the ability of AI to accelerate the software development process is cooling down.
We think the Australian technology sector will converge toward the US over time, given the dominant underlying driver for the sector is the same.
Investors in the US seem to have acknowledged that the benefits of AI to software development were exaggerated. Software products are typically more complex than outside observers were giving credit for. But Australia hasn’t received the message.
We cannot reconcile the divergence in share price results with company specifics. The sector is significantly undervalued. We think many firms we cover should be mostly unaffected by AI.
Companies like WiseTech have spent billions and decades developing their products. Even at lower software development costs because of AI, the cost and time to replicate this software remain high and long.
Additionally, WiseTech has many outstanding customer problems to solve and can now do so at a similarly increased pace, thereby maintaining its competitive distance. To a lesser extent, we see a similar dynamic with SiteMinder and Fineos, although their respective competitive distance to their nearest competitor isn’t as large.
