Tech Shares Lead the ASX 200
On Tuesday, tech shares on the ASX 200 were leading the market, with a notable increase of 6.5%. This came alongside a 2.6% rise in the S&P/ASX 200 Index (ASX: XJO). The positive movement appears to be driven by investor confidence, as they are buying into the dip following a significant 7.8% decline in the ASX 200 during March.
Despite ongoing tensions in Iran, investors seem more optimistic today, focusing their attention on the tech sector for potential value buys. However, it’s worth noting that ASX 200 tech shares have been experiencing a downward trend since September 2025. The S&P/ASX 200 Information Technology Index (ASX: XIJ) has dropped by 44% over this period.
The primary concern among investors is how the artificial intelligence (AI) revolution will unfold. Fears about high stock valuations in both the US and Australia, along with substantial capital expenditure on AI, have contributed to this uncertainty. A new fear has emerged this year: whether AI could seriously impact software-as-a-service (SaaS) providers.
This threat is particularly relevant for ASX 200 tech shares, as four out of the six largest companies by market capitalisation are SaaS providers. Portfolio managers Tim Riordan and Michael Teran from Blackwattle Mid Cap Quality explain the concerns around SaaS:
Leading AI companies like Anthropic and OpenAI have released several updates in February, showcasing exponential improvements. These updates have focused on industries beyond traditional software, such as Insurance and Logistics, aiming to reduce costs for enterprises and consumers.
Stocks related to these “targeted” industries have seen sharp declines due to the potential risk of AI disruption. Global markets have been shifting towards value stocks, known as the “HALO” trade (Heavy Assets, Low Obsolescence), as investors gravitate towards businesses with lower AI disruption risk.
Riordan and Teran made changes to their portfolio in February following a shift in their view on AI disruption in late January. They have concentrated capital into technology businesses with stronger barriers, such as network effects, at highly discounted valuations. They also allow their “HALO” winners to continue growing.
WiseTech Global and Megaport Ltd
Blackwattle holds the largest ASX 200 tech share, Wisetech Global Ltd (ASX: WTC), in its Mid Cap Quality Fund. Wisetech shares have more than halved over the past six months. The current share price is $38.66, up 2.1% on Tuesday.
Riordan and Teran view WTC as an ‘Enduring Quality’ business, one of the highest quality companies on the ASX. They believe the company is continuing its multidecade customer and product growth journey. They are excited about the FY27 outlook and see WTC as one of the few technology companies pivoting in the face of AI disruption risk.
They believe this makes a significant long-term, compounding growth profile and highly attractive Risk/Reward makes the current share price selloff a significant investment opportunity.
Blackwattle also holds telecommunications provider Megaport Ltd (ASX: MP1) in its Small Cap Quality Fund. This ASX 200 tech share has also more than halved over the past six months. The current share price is $7.08, up 2.6% today.
Small-cap fund managers Robert Hawkesford and Daniel Broeren describe Megaport as a ‘picks and shovels’ play amid the AI revolution. The company’s competitive advantage comes from the large number of data centers globally that it connects together with physical assets in ~1,000 data centers and a proprietary software layer, offering customers one-touch access from a central location.
The share price has been volatile in recent years and again more recently in a broader sell-off in ‘growth stocks’ and a more indiscriminate sell-off in technology stocks given fear over AI disruption. However, MP1’s networking capability makes it part of the ‘pick and shovels’ needed to deliver AI to corporates globally. It is a beneficiary of AI adoption, so we see current weakness as a buying opportunity.
