Tech sell-off creates rare opportunity for investors

Binaya Dahal

Editorial Intern, Financial Newswire

13 March 2026

A sharp retreat in Australian technology stocks, driven by fears of artificial intelligence (AI) disruption, has created the most compelling buying opportunity in years, says Emanuel Datt, Chief Investment Officer of Datt Capital.

Reacting to the latest reporting season, Datt said the results showed how defensive investor positioning has become, given that many companies delivered results broadly in line with or slightly ahead of expectations.

“In some cases, technology companies are trading at the lowest multiples seen in five years despite the potential for improved profitability driven by AI adoption,” he said.

Investor concerns were centred on the possibility that AI could reduce barriers to software development and weaken established competitive advantages.

However, Datt believes this narrative has become overly simplistic and fails to account for the structural advantages many Australian companies have built over time.

“Many technology companies remain strongly positioned as they possess access to proprietary or regulated data sets that cannot easily be replicated,” he said.

“These data sets effectively form a structural moat that is hard to compete against. Many of these businesses also operate under multi-year contracts with customers, creating a stable revenue base.”

Datt noted that fewer firms exceeded expectations compared with previous reporting periods, which also contributed to a broader reassessment of risk across markets.

“Businesses with structurally strong earnings drivers were not necessarily rewarded in the short term. In our view, that has opened a broader opportunity set for disciplined investors,” Datt said.

Over time, he expects markets to once again distinguish between companies with durable competitive advantages and those facing genuine structural challenges.

Moreover, the encouraging signal in the current market environment was the rise in merger and acquisition activity within the small-cap sector, according to Datt.

He said recent deals have seen several small-cap companies acquired at meaningful premiums to prevailing market prices.

“For long term investors that can be an important indicator that segments of the small cap universe may be undervalued,” Datt said.

Furthermore, as the geopolitical tensions in the Middle East escalate, Datt says long-term investors should focus on underlying corporate realities rather than reacting to short-term market noise.

“Iran has been subject to extensive economic sanctions for decades. As a result, its integration into the global economy is relatively limited compared with larger economies,” he said.