Where is value on offer in the great AI selloff?

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An extra dose of uncertainty has been woven into this reporting season, with a wide swathe of stocks, particularly Software as a Service (SaaS) sold off on concerns that AI will disrupt their businesses. In this podcast IML large cap portfolio manager, Daniel Moore, discusses the stocks where he thinks the falls are fair, versus those where he sees value on offer.

Daniel also covers:

• What big Aussie companies are telling him on AI disruption and white-collar redundancies
• Where investors are turning, and why, as they sell off SaaS
• How exposed IML’s large cap portfolios are to technology stocks
• Which resources stocks he likes and what he thinks of gold’s recent run

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Lightly edited transcript – Recorded on 23 February 2026

Jason Guthrie: Hello and welcome to Navigating the Noise, a podcast by Natixis Investment Managers, where we bring you insights from our global collective of experts to help make you make better investment decisions. I’m Jason Guthrie, your host, and joining me today is Dan Moore from IML. Dan is a long-serving portfolio manager in the large-cap team there and has been managing the Australian Share Fund and All Industrials Fund for a long period of time, and it’s great to have him back on the pod in the midst of reporting season here in Australia. Welcome Dan, looking forward to diving into things today.

Daniel: Thanks, Jase. Happy to be here.

Jason: Now we know markets always tend to be quite volatile during reporting seasons, hits and misses, not a lot of in between. This season certainly hasn’t disappointed us. I’ve been watching it closely on the sidelines here. And I saw a recent article in the AFR actually Dan, it was titled When Blue Chips are Trading like Bitcoin, Australia’s Wild Ride, which I think says it all. Now volatility really started, I think, earlier in the year or late last year with a sell-off in software names offshore and here in Australia. So tell us what’s happening here, Dan.

Daniel: Yeah, Jase, there’s a lot going on. I think it’s fair to say it’s important to think about the starting position and valuations for the market were quite elevated in many sectors within the Australian marketplace. Which did create a bit of vulnerability if there was some bad news or new news that could be viewed negatively like AI disruption.

So there was this vulnerability in markets. Then we’ve had some new LLM models come out, particularly from Claude, which have been quite impressive. And that’s really got the market a bit spooked about the disruption risk to a whole bunch of companies, not just software, but also industrial companies.

And so we’re seeing a lot of volatility. We’re seeing a lot of high P/E stocks derate substantially. And then in reporting season itself, we’ve seen companies have big moves to the upside and the downside, really magnifying relatively small beats or misses. So, classic example: CBA had a 5% earnings beat, which was a very good result, but the stock was up 20% in two weeks. On the flip side, there were a couple of industrial companies with small misses, like Cochlear or Nick Scali, and they were down 25%.

Jason: So it certainly seems like a bit of a minefield out there at the moment. Can you draw on the distinction between some of those companies where the falls are maybe fair versus those that you don’t think will necessarily be as impacted by AI, and where there’s been punishment and there’s some value on offer in the space?

Daniel: Yeah, that’s exactly what we’ve been looking at, Jase. From the starting point, if your valuation is very high, what that intrinsically means is the value of the company is much more in the future rather than the earnings today. So if your PE multiple is, say, 50, essentially the earnings in the next few years is not that relevant. It’s really about the earnings 20 years out plus, and the problem with those stocks is if the future is more uncertain, they’re vulnerable to a big derating because people are less sure about that future value.

What we’re seeing with investors casting their eye more to AI disruption risk are those companies with very high PEs have come off a lot, and I think that is justified in many cases because the future is harder to predict today. The risk that AI will have on different business models isn’t clear. So I think it’s fair that those high-PE stocks have been derated.

On the flip side, in the reporting season there are industrial companies trading on more reasonable valuations where they’ve had a miss of earnings of two or three percent, but the share prices are down 10 or 15%. And those companies have probably been unjustifiably hit. There are companies on the other side with two or three percent beats that are up 15-20% that have probably gone up too high. We own stocks in both camps. For example, we own some CBA, which has obviously gone up substantially which has probably gone up too much, and we’re reducing. Brambles, which is another one. On the negative side, we own CSL, which had a small miss and is down about 15%, and Steadfast as well, which is down about 15% and hasn’t even reported yet. So a mixture.

Jason: Yeah. I’d love to get into some of the other names there in a minute, but more broadly you’ve obviously done a lot of meetings over the last two to three weeks and more to come with a number of executive teams. Has there been anything in particular you’ve learnt from these meetings with the CEOs across the different sectors, something you weren’t quite across in relation to AI disruption?

Daniel: So it has been one of the key learnings from reporting season, and we really reflect on the comments of the CEO of Anthropic, which claimed that 50% of white-collar jobs are going to go by 2030. Anthropic by the way, owns Claude.

We’ve asked many big companies about this, including CBA, Origin, and Telstra. The meeting with the CFO of CBA was really instructive, and he made this comment which was “AI is really helpful, in replacing or automating certain tasks, but at this stage it can’t, or it is much harder, to replace a role.” I thought that was really interesting. And to be honest, all the companies really pushed back on major redundancies in the next three to five years. The practicalities of automating multiple roles – there’s just so many issues. One is you have to redesign workflows, which takes a very long time in these big complex organisations.

You also have risk, and compliance issues, particularly in regulated industries. The Origin management team gave really good examples: if you get a billing error wrong with certain vulnerable customers the fines can be tens of millions of dollars. So, again, for regulated industries, which many are, even the risk of implementing AI, with certain decision making, if it makes a mistake the cost is enormous and in those processes, the AI adoption will be much slower compared to other industries where the cost of making a mistake is lower.

We think there’s a bit of a bit too much hype in terms of the impact in the short term. Further out, beyond the next five years, 10 years plus is another question. And no one’s overly confident on what that looks like because the models keep evolving all the time.

Jason: And returning to those software names, specifically within the large-cap portfolios at IML, are you holding much in the technology software space, and how have those names performed through this recent two- to three-month period of volatility?

Daniel: We only own one software company. We have a small position in TechOne; it’s 2% of the portfolio. We’ve owned it since 2010. It’s been a fantastic performer for us. It’s definitely been beaten up with other software names, but it has outperformed the others substantially. In February the share price was pretty flat and that’s because they provide very complex ERP software—difficult to replicate, for local councils and universities, highly regulated industries. The customer sizes are small; the average software cost is around $1–$2 million per customer. These aren’t customers that will build their own software in-house and they’re typically risk-averse organisations without profit motives, so they’re unlikely to adopt AI software from startups. And also, positive news, they also had an AGM a few days ago and upgraded guidance, as AI is turning out to be a bit of a positive for them, with new AI products improving their earnings outlook.

Jason: Looking at some of the more traditional industrial names, you mentioned a few earlier, but certainly a key area that IML invests over the long term, I know the banks and Telstra and Brambles have been quite resilient through reporting season, really supporting the share market’s run to record levels. Is that driven by actual earnings growth or is there another dynamic at play, such as capital flowing out of high-growth, high-valuation companies?

Daniel: I think there are two factors. When we look at Brambles and Telstra, even Amcor to some degree, the results have been better than expected, but not massively so—perhaps one or two percent beats—yet their share prices have risen five to ten percent.

The other driver is the market seems to be gravitating toward companies with more physical assets, because those companies are much less at risk of AI disruption. Those companies are benefiting a little bit from that as investors seek safer, more physical assets. We are seeing the same in the commodity space as well.

And in the case of Telstra part of that good result was cost out. And it’s becoming quite apparent the telco space, because a lot of the processes are quite recurring, not overly complex processes, there is probably a lot of room for efficiency through AI, so we believe and I think the market does as well there is going to be cost-out for many years to come. And they are probably ahead of their competitors in doing that, so that’s why that share price as done as well.

Jason: And you mentioned hard commodities; we should touch on resources before we close. Obviously a big weight of the index in Australia and IML is typically underweight due to the sector’s cyclical and volatile nature. What is the team’s stance on resources at the moment? What are they holding, and how have they been performing? Selfishly, should I be lining up at the local gold bullion store in Martin Place?

Daniel: Our office overlooks that line; we keep an eye on it every few days. It’s interesting how it fluctuates with the gold price. To be honest, our resource position is probably the largest it’s ever been since I joined the firm in 2010.

We’ve been buying more BHP—from late last year at around $40—and it’s now over 10% of the fund. That’s done very well for us this calendar year, it’s done extremely well, and it’s had a good reporting season, with only a modest beat, but the stock is up around 7% as investors gravitate to physical-asset companies.

What we like about BHP is its commodity mix is improving, and this was the first result where copper accounted for over 50% of their earnings. We’ve been pretty cautious on the outlook for iron ore; we are quite happy to see its iron ore earnings becoming a smaller and smaller part of the business. In our valuation they are roughly 35% of our valuation.

The copper business is substantial and it should grow over time. BHP is talking about copper production growing by about 40% over the coming decades. They have good exposures there. Obviously the copper price has run really hard, which has helped. I wouldn’t be buying BHP shares today, I think it’s at $54 today, but in the low 40s we thought it was a good buy, and we’re happy with that exposure.

We do own some gold—Newmont, its a 2% position. Gold is a really tricky one: the reason to be bullish gold is the unsustainability of government debt and budget deficits globally, especially in the US. And those reasons are there. The question that’s hard to answer is: “What’s the fundamental long-term price?” That is a hard one to answer. So that’s why it’s not a big position for us, but we have an exposure because we do acknowledge those issues are present. And we picked Newmont because it’s got very low cost assets and an extremely long reserve life of 40 years, which is the best in the industry globally.

And that’s the same with BHP. It’s a similar thing. We’re looking for low-cost producers with very long life mines. In the oil space we own Santos. We’ve got a 3% position there. That’s also done pretty well recently. Again it’s the same story, very long reserves, 18 years of reserves and their resource life I think is over 50 years, and low cost as well and very good free cash flow because their CapEx is going to be reducing substantially in the next 12 months.

So those positions have been performing well for us but where we’re not exposed, we’re not in the more speculative end of the market – the lithium stocks or the rare earths or the explorers. We tend to avoid that part of the market.

Jason: Brilliant. Thank you, Dan, as always. We’ll wrap it up there. Appreciate your time and insights, particularly during a busy period. Hopefully you have productive calls and results over the back end of reporting season. Thank you to all our listeners for joining us today. If you enjoyed the episode, please tune in again very soon to hear more from our global collective of experts

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