Company Interview / Which stocks are facing an AI reckoning?

Key Points:

AI viewed as eroding moats and long‑duration growth assumptions for SaaS and tech stocks Traditional oligopolies seen as using AI to deepen cost advantages and strengthen moats Portfolio tilted to energy and physical‑asset names including Aurizon, Telstra, Woolworths and Ampol Prolonged fuel supply disruption expected and a challenging near‑term domestic outlook

Reece Birtles from ClearBridge Investments states that artificial intelligence is reshaping the earnings outlook for Australian equities, particularly software-as-a-service names. Birtles argues that companies such as Xero (ASX:XRO), Car Group (ASX:CAR), Seek (ASX:SEK) and WiseTech (ASX:WTC) have relied on sustained double‑digit price and earnings growth out to 2040, assumptions he now regards as unrealistic. In his view, AI lowers the marginal cost of adding software features, broadens the competitive set and erodes pricing power, weakening the moat around many growth and SaaS stocks.

By contrast, Birtles points to traditional Australian oligopolies such as Woolworths (ASX:WOW), Telstra (ASX:TLS), Wesfarmers (ASX:WES), Aurizon (ASX:AZJ) and Ampol (ASX:ALD) as structural beneficiaries. He states that these capital‑intensive businesses are using AI to cut costs and lift productivity, reinforcing already strong competitive positions built on scale, physical assets and entrenched market share. Birtles maintains that the past 15 years of market enthusiasm for capital‑light software moats is an aberration now being challenged.

Positioning-wise, Birtles outlines an overweight stance in energy and physical‑asset plays, noting these exposures have performed strongly amid Middle East tensions and disrupted energy supply chains. He sees prolonged pressure on Australia’s fuel supply and cautions against excessive optimism on the domestic economic outlook over the next six months.