Company Interview / 30% downgraded, 70% standing: Morningstar’s reality check on AI risk

Key points:

Morningstar trims moats on roughly 30% of 130 software / tech names on AI risk WiseTech Global (ASX:WTC) and Xero (ASX:XRO) viewed as more resilient than market sentiment suggests TechnologyOne (ASX:TNE) and REA Group (ASX:REA) downgraded on expected long‑term competitive encroachment Hansen Technologies (ASX:HSN) downgraded to no moat, while SiteMinder (ASX:SDR) remains a preferred long‑term platform

Morningstar’s Roy Van Keulen outlines a measured outlook for software stocks amid growing concern about artificial intelligence. Keulen notes that Morningstar has recently reassessed around 130 global software and tech names for AI risk, with about 30% downgraded on moat strength. He stresses that the more important point is the majority that retain their moats, which, in his view, suggests market fears of sweeping AI disruption are overstated.

Keulen highlights several Australian names. WiseTech Global (ASX:WTC) is seen as facing overdone pessimism, given his view that logistics software still has many problems left to solve. Xero (ASX:XRO) is now rated a buy by Morningstar, with Keulen arguing that AI tools are unlikely to materially enhance its offer, but that its distribution via accountants and recent share price weakness underpin its appeal. TechnologyOne (ASX:TNE) is downgraded as Keulen expects AI‑enabled niche competitors and global ERP players to chip away at its module suite over a 20‑year horizon. REA Group (ASX:REA) is also downgraded from wide to narrow moat on the view that AI‑driven buyer tools could erode the value of premium listing tiers.

Smaller names such as Hansen Technologies (ASX:HSN) lose their moat, while SiteMinder (ASX:SDR) is seen as retaining long‑term strategic advantages.