For the past two years the case for buying anything with “AI” in its investor deck has rested largely on faith: the promise that a technology reshaping the way companies work would eventually justify the eye-watering multiples attached to the shares riding the theme. That faith has made and unmade fortunes on Wall Street, and it has left plenty of Australian investors nervous about paying tomorrow’s price for today’s earnings. Against that backdrop, a screen published by the investment research outfit Simply Wall St has tried to answer a more grounded question: which locally listed AI-exposed companies are actually growing their profits, and doing so at a valuation that does not require a leap of faith to stomach?
The Simply Wall St screen is a familiar kind of exercise for anyone who follows retail investing platforms. It runs the ASX’s AI-adjacent cohort through a filter that looks for two things at once: earnings that are genuinely climbing, and a share price that has not run so far ahead of those earnings that the risk of disappointment outweighs the upside. The result is a shortlist of names the platform argues combine profit growth with what it calls reasonable valuations, a phrase that carries a lot of weight in a market where the most talked-about AI stocks trade on multiples that assume years of flawless execution.
Why the “reasonable” bit matters now
The timing is not accidental. Australian markets have spent much of the past year caught between excitement about AI’s productivity promise and growing unease about how much of that promise is already priced in. The ASX has wobbled on days when Wall Street’s AI leaders sold off, and commentators have been openly debating whether the sector is inflating a bubble that local portfolios are quietly exposed to through index funds and superannuation. In that climate, a screen built around value rather than momentum is really a bet on a particular worldview: that the safest way to own the theme is through companies whose profits you can actually point to, rather than those whose story you have to believe.
The ASX does not have a Nvidia, but it is far from short of AI exposure. The local market spans logistics software heavyweight WiseTech Global, data-centre operators such as NextDC and Macquarie Technology, network specialist Megaport, and a long tail of smaller firms embedding machine learning into everything from healthcare to mining. Some of those names trade on valuations every bit as demanding as their US counterparts, which is precisely why a filter that insists on profit growth and a sensible price is a meaningful narrowing of the field rather than a rubber stamp on the whole sector.
Two ways to read the screen
For the value-minded investor, the appeal is obvious. Buying growth at a reasonable price is the oldest sensible idea in the market, and after a period in which AI enthusiasm rewarded stories over statements, there is comfort in a list built on earnings that already exist. On this view, the companies that survive a downturn in sentiment are the ones with real customers, real revenue and real profit, and screening for those qualities is a way of participating in the theme without betting the house on the froth.
The sceptical reading is worth putting alongside it. Screens like this are a starting point, not a verdict, and “reasonable valuation” is a relative judgement that depends heavily on the assumptions fed into it. A stock can look cheap against forecast earnings that never arrive, and AI is a field where forecasts have a habit of being revised sharply in both directions. Backward-looking profit growth also tells you little about whether a company’s edge is durable or about to be commoditised by the next model release. Financial regulators and consumer advocates have repeatedly cautioned that automated stock screens can lend a false sense of precision, and that a tidy shortlist is no substitute for understanding what a business actually does and how it makes money.
What it means for Australian investors
The Australian stakes here are more personal than they first appear. Roughly four in five working Australians have money in superannuation, and a large share of that sits in funds with meaningful weightings to technology, both offshore and increasingly at home. That means the debate about AI valuations is not confined to active traders squinting at screens; it flows through to retirement balances whether or not the average member has ever heard of the companies involved. A framework that separates profitable, reasonably priced AI businesses from speculative ones is, in that sense, a question of national financial resilience as much as individual stock-picking.
It also lands as the domestic AI investment story reaches a fever pitch on the supply side. Billions are being poured into data centres from Sydney out to regional New South Wales, capital raisings tied to AI infrastructure have become a regular feature of the ASX, and policymakers are wrestling with how to capture the economic upside without importing the governance risks. For retail investors, the practical takeaway from the Simply Wall St exercise is a reminder that the listed market offers several ways to play the theme, and that they carry very different risk profiles depending on whether you buy the picks-and-shovels infrastructure, the software layered on top, or the speculative minnows promising to disrupt an industry.
What is next
None of this settles the bigger argument. If global AI leaders keep delivering, the reasonably valued local names may end up looking like a missed opportunity next to the high-multiple momentum stocks. If sentiment turns, the same conservative screen could prove its worth in a hurry. The sensible course for most investors sits where it usually does: treat a screen as a research prompt rather than a recommendation, read the financials behind any name that catches the eye, and size positions for the possibility that the AI story is both real and, in places, badly overpriced at the same time. What the Simply Wall St list usefully does is drag the conversation back to fundamentals, at a moment when the market has spent a lot of energy arguing about narrative.
Sources: Simply Wall St via GNews.
