Where are the AI investment opportunities?

Our final speaker on day two is FN Arena's Rudi Filipek van Dijk.

Rudi founded FN Arena in 2002 and during his career has spent time as a publisher, editor and an investigative reporter.

His forensic approach is always matched by his ability to tell an intriguing story.

And what better way to finish this investor webinar than with his insights into where the AI investment opportunities are.

Over to you, Rudy.

How can I fail after such an introduction?

I think in all seriousness, I think the best term to define the market in 2026 is through anxiety.

There's a lot of angst amongst investors.

I mean, if it's not about an erratic

President at the White House, it's about AI disruption of overspending, or in more recent times, it's the price of oil, inflation, bond yields, and what might happen with central bank policies.

I mean, as a result of that, most share prices in the market are being de-rated, which means the share prices have become cheaper.

And there's not necessarily anything happening with their fundamentals that might still come, of course.

But the share market outside of a very small selection of winners is now basically becoming a value proposition for investors who can look beyond the immediate headwinds that are there.

The most obvious theme to pick is still, I think, is AI, irrespective of my own affinity and bias this year.

Because it wasn't that long ago that all you needed to do as a company was express some affinity with AI and that made you a winner and popular in this market.

And today it is completely ignored.

It might actually be a headwind if you dare to mention the word today.

Now, we all know, as investors, if you've been long enough around, these things, they're not for eternity, they don't stick around forever and ever, but they can stick around for longer than you and I have patience.

Nevertheless, I believe that the whole AI narrative, the story to develop, that's a very long-term story.

History shows us that those narratives, those developments, they don't come

in a very brief time, they don't come in straight lines either.

Well, we've seen that the straight line has been broken, but there will be many, many years of AIs yet to come in our lives.

It's going to change the world, have no doubt.

But the way it does, that's open for debate and for question marks, of course.

Now, if we are looking

for the value propositions in AI-related companies, then I would still think that the first group is around infrastructure.

And on the Australian Stock Exchange, infrastructure is basically data centres.

And data centres

always elicits two names, Goodman Group and NextTC.

Goodman Group is one of the global leaders in what it does, and that includes building data centers for the likes of Amazon and others.

And NextTC is the largest operator of data centers that we have on the stock exchange.

There are others

There's a Macquarie Telecom, now technology.

There's, for example, Infratil.

There are also companies that operate in the periphery of data centers.

Think of Megaport, for example, but also DUG Technologies, a Southern Cross Electrical.

and others.

So the theme goes beyond pure data center developing and owners, but irrespective of last year's skepticism that crept into the market towards data centers and enormous amounts of spending,

that are happening globally.

I mean, Nvidia recently prepared the market that its workflow will, its order flow will accumulate into $1 trillion US.

I don't know about you, but for me, that's almost, I can't almost grasp how many dollar bills $1 trillion is for one company that sells hardware.

Now, there was an argument to be made.

Contrary to the sceptics that has popped up last year, that spending on data centres and on infrastructure is actually quite defensive and quite reliable, because irrespective of what one of our prime ministers said during COVID,

But AI is a race.

And those big spenders, they do not want to be left behind.

So there's an argument to be made is actually quite defensive and quite reliable.

And if we look at the February reporting season, that's exactly what companies like Goodman Group and NextCC would tell their shareholders.

They have very strong order books, very strong results.

A second category of AI-related value propositions now in the market are the technology stocks, the software and other technology stocks.

They have been de-rated in indiscriminate selling because somehow the world got a word of the fact that they could be disrupted by further developments in AI.

That indiscriminate selling, of course, it meant that they've all sold down large, small,

fat and slim.

And that obviously now means that those investors who can pick the ones that have been undeservedly sold down will offer great value here.

A few names that need to come to mind on my perspective would be Wisetech Global, which has often mentioned disrespect.

and also a technology one, but you could stretch that theme a little bit further.

You can include the likes of GAR group, RVA group, and you can even go a little bit in the other direction and include the likes of HUB24 and NetWealth group.

Platform operators, but AI should all else being equal, turn them into more efficient operators and maybe even act as a mode.

Now there's another category of stocks that could be mentioned in this regard, and those are the more non-traditional stocks that are companies that are related to AI.

I mean, this could even include the mining companies.

I mean, BHP is a very enthusiastic,

user of AI, but it's also in the same respects as one of the world's largest mining companies, it's also tempering investors' expectations that we shouldn't expect their profits to increase materially, because at the end of the day, for a company like BHP, it is still about materials prices, of course.

But there are other companies.

Maybe there are some retailers like a Harvey Norman or a JB Hi-Fi.

They are essentially selling the consumer products upgraded with AI to consumers.

So as those products will become more popular, that should all else bring equal benefit to those companies.

You can even stretch it a little bit further.

You can include a company like Officeworks, which operates on the rest farmers.

You can include a company like Dikadata.

which basically sells chips to data centers and helps small and medium large companies in New Zealand and Australia upgrade their technology.

The fear

that AI will disrupt.

It's obviously not just something that will hit those companies that have now been hit.

It can equally hit more traditional companies.

It's not a free-for-all in banking.

One of the sectors that one could highlight is, for example, also the insurance companies.

They are traditionally non-AI companies.

In theory, they could do a lot with AI, but in the same theory, AI could also increase

the market transparency for such companies, and that would ultimately become a negative as well.

Now, long story short, this is definitely not something that's going to change in the short term, because the dynamics are what they are.

But I do believe that smart investors, they start preparing in advance, and the best time to prepare, of course, is when those stocks are out of favour.

And that might be something like today.

So Rudy, AI related stocks and commodities and other traditional, more traditional businesses have largely traded in opposite directions to each other.

Do you think a time when, do you think there will be a time when they can both perform for investors at the same time?

Yeah, the past decade or so has seen quite extreme dynamics in markets.

It was either one side or the other side, and they haven't really cohabitated, so to speak, for very long times.

History shows you that those extreme times, they do not go on forever and forever.

And I would like to think that we, at some point, we will get a time when both

the more traditional business models and the more modern business models that are more AI linked, that they can coexist and both provide value for shareholders.

At the moment, that's not the case.

We haven't seen that in the past few years when everything was pointing towards AI and not towards commodities.

I do think in my wildest dreams that we will progress to a time when both those opposites in the share markets can perform.

But I also acknowledge that that is not necessarily the case in the short term.

And you mentioned sort of technology stocks, the SaaSpocalypse and a few other quite media friendly terms have been bounded around recently.

Of course the irony is that technology stocks are effectively being disrupted by technology in AI.

How do investors protect themselves from these type of outcomes?

What should they look to do?

I think there's two elements to this.

One very quick side way of this one is that winners versus losers is obviously not simply something that's going to determine the outlook for technology stocks.

It will determine pretty much the outlook for every company in every sector, ultimately.

I mean, I've mentioned previously the insurance companies and

It's the same question.

Will insurance ultimately be a beneficiary of AI or will it actually disrupt that sector so much that most insurance companies will face risks to their margin and to their profits?

The future will actually determine that.

We don't know that quite yet.

The development of AI is so quick that probably the best way to deal with it is to stay alert and to try to stay on top of things.

As I mentioned earlier, the chances that a well-embedded, well-run, large-cap, high-quality technology stock that has a very loyal customer base will ultimately end up being a beneficiary of AI is much higher, I believe,

then they will end up being a victim.

But there's no 100% outcome guaranteed in either way.

So I think for investors, it's probably best to try to lean also maybe on experts that cover that sector, research that sector, and try to identify which companies are better than others, and most likely to come on top.

And that is probably at this point in time, I think the best way of dealing with it and also be prepared that even if the odds are in your favour, that still doesn't mean you have a guaranteed successful outcome.

Staying flexible and staying agile is probably the best way in this respect.

So Rudy, when we look at the AI market, obviously in the US, we see these huge hyperscalers.

We see a lot of this massive amounts of capital being spent into the sector.

Are there any particular learnings that you think we should be taking out from what's happening in America?

Interesting question.

Are there any learnings?

The one thing I pick up is that everyone inside the sector and everyone who's doing the spending, they seem to have very little doubt that they are doing the right thing.

Yet, your traditional value investor, they can't believe what is happening and they like to rely on history and then make comparisons with railroads and with laying cable in the 1990s.

But I'm not so sure whether history, as they always say, history doesn't necessarily repeat.

It may rhyme, but it doesn't always repeat.

And in this case, I do believe that AI is something that we haven't experienced in our history.

So we have to be careful in simply copying the past and pasting it into the future.

Again,

The US economy is very, very solid and very resilient these days, and that is because of AI.

We can throw a lot of headwinds at the economy, but the economy so far is refusing to budge, and AI, of course, is the very strong pillar underneath it.

For some people, that's the risk.

For other people, they easily draw confidence from that.

No doubt we will have a lot of lessons to learn in the years ahead.

I think we've already learned one very important lesson in this, that the whole development of AI is not going to go into a straight line.

We've seen that.

But as far as the way from here onwards goes, take your pick.

It's very much dependent on the confluence of so many factors.

But I think one thing

will continue coming to the fore and that this AI should not be underestimated.

It'll change shape and structure.

It'll change anything it can change.

But ultimately, I think the outcome is that we are progressing towards a new world, whether that's a brave new world or a lesser brave new world is something we will have to find out.

I think the message is to stay alert and stay informed, Rudy.

I think that that's the best way.

I mean, the one observation that stands above anything else, I think, is that if you read the science fiction books from the last century, they're all wrong at this point.

And so that just shows you how difficult it is to accurately predict the future.

Well, really, we won't look to predict the future in this webinar, but thank you very much for your insights into AI and the investment opportunities that are in front of investors.

It's certainly an area that I know is on their radar, and it's a great topic to close our session with today.

Thank you very much.

My pleasure.