The ongoing discourse surrounding artificial intelligence (AI) stocks has shifted from questioning their valuation to anticipating when the potential bubble might burst. As businesses increasingly adopt large language models like OpenAI’s ChatGPT and Anthropic’s Claude, the promised efficiency gains are becoming a focal point of corporate announcements. Amid this surge of AI-related claims, Wilsons Advisory has identified specific investment opportunities that stand out.
In a recent report focusing on the annual general meeting (AGM) season, Wilsons Advisory singled out Goodman Group (ASX: GMG) as a prime “picks and shovels” investment within the AI landscape. This strategy, reminiscent of past gold rushes, posits that while only a few prospectors may strike gold, suppliers of the necessary tools will always find success. Goodman Group, with a market capitalization of $62.4 billion, has been actively investing in data centre development, positioning itself to capitalize on the growing demand for AI infrastructure.
Wilsons Advisory noted that Goodman recently reported a first-quarter update that, while positive, fell slightly short of heightened investor expectations. The firm emphasized that Goodman’s disciplined approach to its data centre pipeline is critical, especially as demand for cloud services and AI solutions continues to rise. Wilsons stated, “With the US reporting season showing robust hyperscaler capital expenditure amidst AI investment cycles, we view Goodman as a key ASX beneficiary of the AI thematic.”
Despite a recent decline of approximately 15% in Goodman’s share price since mid-August, Wilsons Advisory believes the company offers significant valuation support. The forward price-to-earnings ratio currently stands at 22.5 times, which aligns with its ten-year average and reflects a discount of nearly 10% compared to its five-year average. Wilsons projects that Goodman’s growing exposure to AI trends should support earnings per share growth in the low teens over the medium to long term.
Additionally, Wilsons Advisory has identified TechnologyOne Ltd (ASX: TNE) as a promising investment, referring to it as a “product enhancer.” The company recently introduced its first agentic AI solution, known as Plus, designed to function as a virtual assistant for local councils and government departments. This development significantly expands TechnologyOne’s product offerings and is expected to sustain an impressive net revenue retention rate exceeding 115%.
Despite TechnologyOne trading at a forward price-to-earnings ratio of around 70 times, Wilsons maintains confidence in the stock based on the improving outlook and the quality of earnings driven by the Plus solution. This optimism stems from the belief that the product’s impact has not yet been fully reflected in consensus estimates, creating potential for upward revisions in the medium term.
Investors considering opportunities within the AI sector might find Goodman Group and TechnologyOne Ltd to be worthwhile options, particularly in light of the insights provided by Wilsons Advisory. The firm’s evaluation highlights the importance of discernment in an environment saturated with AI hype, underscoring the potential for sound investments even as market dynamics evolve.
As the AI landscape continues to develop, these insights from Wilsons Advisory could guide investors seeking value while navigating the complexities of this rapidly changing sector.
