Morgan Stanley cuts ASX tech valuations on AI risk

InvestorDaily

The investment firm has cut price targets by an average of 20 per cent across its Australian software and tech coverage following a US trip, citing AI-driven coding disruption risk. Morgan Stanley has lowered its ASX tech and software price targets by an average of 20 per cent, warning that much of the market is still priced on pre-AI coding model assumptions and requires a total reset. The report comes after the team returned from a US trip and Morgan Stanley’s Tech, Media & Telecom Conference held in San Francisco last month. 

“With insights gained from seeing a range of leading US/global software and Internet companies, as well as the disruptive new AI platforms … we believe it is appropriate to adjust our long-term earnings and profit margin estimates and valuation framework (i.e., for higher risk) for each of the software and Internet companies we cover.” Citing a “dramatic change” in the way code is written, timed and cost, the firm said stock analysis must adapt as the facts change. The changes reflect trims to long-term revenue growth forecasts of 2–3 percentage points on average, alongside deeper 4–5 point reductions to terminal EBITDA margins.

The rest of this article can be found at investordaily.com.au.