Rudi’s View: The Megatrend You Simply Cannot Ignore

Rudi's View | 10:00 AM

In this week's Weekly Insights:

-The Megatrend You Simply Cannot Ignore
-FNArena Talks
-Ask FNArena

By Rudi Filapek-Vandyck, Editor

The Megatrend You Simply Cannot Ignore

Two and a halve years have passed since financial markets, and the world at large, woke up to a new technological break-through labeled Generative Artificial Intelligence.

By now, it seems initial investor euphoria has been replaced with general skepsis about true importance and impact duration of the new technology promise, as also shown in share prices dipping lower and not necessarily revisiting the levels that featured at the start of 2025.

Look no further than HMC Capital's DigiCo Infrastructure REIT ((DGT)) spin-off which made its ASX debut on 13 December last year on a minor discount to the $5 per share IPO pricing, but whose share price is nowadays trading closer to $3 for a concrete example of how sentiment has turned for what seemed the no-brainer momentum trend to jump on over the past two years.

For good measure, not all those share prices locally and internationally have left a gap over the past six months, but many have. And from where I am sitting and observing, it seems many investors would rather buy into Aurizon Holdings ((AZJ)), Iluka Resources ((ILU)), Lendlease ((LLC)) or Monash IVF ((MVF)), and wait for better times to arrive for such market laggards, than grab the opportunity in less ebulliant share prices from obvious AI beneficiaries.

Ironically, today's wait-and-see approach in Australia contravenes the rush by astute investors globally, including private equity and large pension funds, to grab their slice of what is promised to deliver the next economic and societal in-depth transformation.

So why isn't there a lot more local enthusiasm for owning shares in Goodman Group ((GMG)) and other AI beneficiaries on the ASX?

Reasons To Be Skeptical

It's not as if the promise of a different world tomorrow hasn't arrived previously on Australian shores, and on most occasions the initial hype has quickly turned to dust or the true winners are mostly listed overseas. Think 3D printing and legalised cannabis as examples of the former and smartphones and social media platforms for the latter.

Online shopping and retailing has delivered on its promise of transformative migration, but for investors there are at least as many success stories as disappointments because, underlying, any outcomes are still defined by consumer spending, costs and competition.

Those old enough might still have nightmares about that Great Promise of the late nineties; the Internet.

In between, of course, we also witnessed the emergence and implosion of the Commodities Super Cycle thesis, which got interrupted by the Global Financial Crisis (Iate 2007-March 2009) but then died a silent death in 2012.

GenAI, carried by chip manufacturers and megacap companies in the US and mostly by data centre builders and operators on the ASX, is now in its third year running, which already is a long time in share market terms. Share prices in Goodman and the like more than doubled from the lows in late 2022 into late-2024/at the start of this calendar year.

So with share prices not the cheapest in an expensively priced market and with critics reminding us many hundreds of billions of investments into GenAI have yet to deliver the killer app everybody wants to purchase, maybe common sense dictates the time to chase this trend has now well and truly passed?

As per always, it all depends on how best to assess this new phenomenon, and whatever is the most accurate background and general context.

GenAI Is Developing A Brave New World

According to former Google CEO and Executive Chairman, Eric Schmidt, the development of GenAI is still only embryonic, with many more stages of development on the horizon, and truly transformative outcomes along the way.

In a recent TED Talk interview (link below) released in April, Schmidt argued the advent of AI is, contrary to investor hesitance, still "wildly underhyped" as general understanding is not yet fully appreciative of what is yet to be achieved through this new technology.

The emergence of non-human intelligence, which is what AI essentially embodies, is likely to turn into the most significant development for the last 500 or even 1000 years, he boldly suggests, leaving all other technological revolutions throughout that period in its shadow.

I encourage investors to watch the interview. Technologist turned AI evangelist Schmidt is far from a lonely voice on this matter. In October last year, FNArena interviewed Nilesh Jasani, who runs his own global innovation fund (link included below). The following paragraphs are from Jasani's latest update for investors: