By Joanne Tran
Antipodes founder Jacob Mitchell is bullish on big tech and is betting that artificial intelligence that’s been adopted by the likes of Microsoft and Alphabet will provide the companies with an important competitive advantage for the “foreseeable future”.
While both firms still generate most of their profits from existing businesses – digital advertising for Alphabet and software sales for Microsoft – the chief investment officer says it’s “a question of what multiple you’re paying for businesses that are going to adopt these tools”.
Alphabet and Microsoft are “in a great position to adopt them and offer them back to us as services,” says Mr Mitchell, speaking on a Future Generation panel with Wilson Asset Management’s Geoff Wilson and Hammond Care’s Mike Baird. “But that’s going to happen over a period of time, and it will take a long time before it becomes material to profitability.”
As for Apple, Mr Mitchell said the iPhone maker was still too “dependent on the very gross profits that they earn out of the hardware” with 70 per cent of profits generated from selling a device.
“Consumers are starting to get the cost of living pressures,” he said on the panel. “Even with inflation falling, there’s a lag effect of repricing interest rates. We’re really only just starting to see it in the Australian context where these mortgage, fixed rate mortgages are rolling off. And we see that in other markets as well.
“So we’re not really keen to pay apples trading on the highest relative multiple in its history … that’s very sensitive to consumer spending.”
Other stocks that Antipodes is invested in include Germany’s Siemens Energy, a manufacturer of wind turbines, high transmission grid equipment, and gas turbines that Mr Mitchell says is “basically it’s a one-stop shop for the energy transition”.
Wilson’s stock picks
He also likes Taiwanese chipmaker TSMC, that makes the graphics processing units, or GPUs, that are needed to power AI machine learning.
“And instead of paying like a really high growth multiple like in Nvidia… TSMC is available on you know, more like 15 times,” Mr Mitchell says.
Meanwhile, Geoff Wilson says he likes ASX-listed digital infrastructure play Global Data Centre and financial services giant AMP, saying he remains confident that AMP’s chief executive Alexis George will help deliver on the company’s guidance.
Earlier in the day, Mr Wilson used a Wilson Asset Management briefing to rally his investors to continue their fight against the government’s planned changes to franking credit rules.
Mr Wilson remains concerned the changes will reduce the flexibility of particularly smaller companies to pay out fully franked dividends.
While Mr Wilson says he has received no response from Federal Treasury or Treasurer Jim Chalmers to WAM’s various appeals on the issue, he remains hopeful that the Greens and independent senators could block the changes in the upper house.
“That gives me a lot of hope.”
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