AI-linked stocks and even property trusts have been caught up in the sharemarket’s sell-off

AI-linked stocks promised the best of both worlds in terms of growth and security but when it comes to the current sharemarket sell-off there is nowhere to hide.

Tesla’s share price has fallen a massive 47 per cent on a year ago. Picture: AFP

With artificial intelligence stocks in the eye of a sharemarket storm, investors have turned against just about any listed company with links to Ai.

It turns out that “proxies” for Ai, such as Tesla (the most popular overseas stock for Australians), or even a blue-chip A-REIT such as the Goodman Group, are now in the firing line.

AI-related stocks enjoyed the upside from hype in 2024. But this year major questions arise about the path to profitability of AI products and the amount of investment needed to fulfil that promise.

As the ASX 200 enters correction territory, high-profile AI stock NextDC is down 16 per cent over the year to date, while it’s smaller pure-play rival, Macquarie Technology, is down 22 per cent.

But the surprise addition to the roll call of beaten-down AI-related stocks is Australian property trusts, whereby the promise of AI and surging data centre activity had pumped up the action – until now.

Goodman, the blue-chip leader of the A-REIT sector, offers a perfect example. The company has announced a retail offer to raise $400m at $33.50. The offer is “live” (it closes March 13 at 5pm) but on the ASX yesterday Goodman was trading at just over $30.71.

The weakened Goodman price – down 15 per cent year to date – has to be set against a consensus price target of $37 from the market where most brokers are supportive of the company.

Nonetheless, this week’s market rout creates an uncomfortable twist for Goodman and a serious dilemma for 60,000 Goodman retail shareholders, most of whom will be waiting until the closing bell Thursday to see if the offer at $33.50 is worth the money.

Goodman Group chief executive Greg Goodman. Picture: John Feder

As Wilsons Research Group pointed out, Goodman has not had a capital raising for 12 years and, ironically, the move is aimed at funding data centre projects.

Data centres already represent more than 40 per cent of work in progress at Goodman.

Fund manager Roger Montgomery says investors “have got tired of waiting to see pure-play AI stocks making money, though I would not put AI-related stocks like Goodman in this category. This is a good business at the right price”.

A sudden stalling of enthusiasm for data centres and AI themes in property also ensures that the flop float Digico – which arrived on the ASX late last year at $5 – is further than ever from returning “into the money”.

Digico, a $4bn portfolio of data centres, originally aimed to tap the growing demand for data storage driven by the AI boom. But it is now down down 13 per cent for the year to date and more than 20 per cent below its IPO price.

The turn against the AI-related stocks, which promised both growth and security, is not restricted to Australia. The best offshore example is Tesla which, is enduring a fierce sell-off.

The Tesla downturn is linked with a variety of issues, from Elon Musk’s political activities to falling Tesla sales. But the stock which pitched itself as an AI play that will soon produce self-driving cars, is down 47 per cent year to date

As the sell-off in all things Ai related plays out, investors will review whether buying a “proxy” is ever any better than buying the real thing.

James Kirby hosts the twice-weekly Money Puzzle podcast

Originally published as AI-linked stocks and even property trusts have been caught up in the sharemarket’s sell-off