Evening Wrap: ASX 200 bounces + Which stocks have AI exposure?

 The S&P/ASX 200 closed 63 points higher, up 0.88%. 

The local sharemarket bounced on hopes of a US debt ceiling deal and rebound in commodity prices, tech names like Wisetech and Altium faded from session highs as investors take profits, a closer look at ASX-listed stocks with AI exposure and a few standalone broker notes.

Let's dive in.

ASX 200 Session Chart

ASX 200 higher but closed off session highs (Source: Market Index)

Markets

The ASX 200 closed below session highs of 1.4%. The market has bounced where it needed to but remains at an inflection point: Do we establish a bottom here or is this just an oversold bounce? Tech stocks experienced a bit of a fade with names like Wisetech (open +2.2% vs. close -0.4%), Altium (open +1.0% vs. close -1.5%) and Appen (high +19.2% vs. close +10.6%). Resource stocks were relatively strong, with iron ore majors up around 1% and copper names up 2-10%. Overall, the market is still trying to stabilise and work its way through a bottom. Let's see how the rest of the week plays out.

Economy

No major economic announcements.

Latest news

Market Insights: AI plays on the ASX

Straight up. There aren't many ASX-listed AI plays. You have to try really hard to find them.

The other problem is that most of these are battered spec stocks. And what happens if your share price spikes when you're unprofitable and possibly dry on cash? Old mate capital raise.

Processing and hardware:

• Chip sets: Brainchip (ASX: BRN)

• Quantum computing: Archer Materials (ASX: AXE)

• Enablers: Weebit Nano (ASX: WBT), 4DS Memory (ASX: 4DS)

• Design: Altium (ASX: ALU)

Infrastructure:

• Data centres: NextDC (ASX: NXT), Dug Technology (ASX: DUG), Global Data Centre Investment Fund (ASX: GDC) and DXN (ASX: DXN)

• Infrastructure: Megaport (ASX: MP1)

Consulting and wholesalers:

• Consultancies: Data#3 (ASX: DTL), Atturra (ASX: ATA) and Bigtincan (ASX: BTH)

• Wholesale: Dicker Data (ASX: DDR)

• Note: Some of these companies do not yet currently and/or specifically provide AI-related good or services

Other:

• Appen (ASX: APX)

Interesting news and movers

Trading higher

• +17.2% Leo Lithium (LLL) – Premium placement

• +10.6% Appen (APX) – Upgraded by multiple brokers

• +8.7% Select Harvests (SHV) – Earnings

• +8.1% Lindian Resources (LIN)

• +7.7% Humm Group (HUM) – ASIC revokes BNPL stop order

• +5.2% 29Metals (29M) – Upgraded by Barrenjoey

• +2.7% Recce Pharma (RCE) – Clinical Trial update

• Copper sector move: Hot Chilli (+14.1%), Aeries Resources (+8.5%), 29Metals (+5.2%)

Trading lower

• -15.9% IDP Education (IDP) – Canadian IRCC changes

• -4.2% ALS (ALQ) – Earnings

Broker notes

Macquarie on Aeris Resources (AIS):

• Outperform with $0.70 target price

• “AIS the third-largest copper producer by market capitalisation on the Australian Stock Exchange (ASX) and has an opportunity to fill the gap that OZ Minerals left.”

• “The acquisition of Round Oak Minerals in mid-2022 added two new cash generative assets to AIS’s portfolio in Jaguar and Mt Colin.”

• “Importantly, AIS has an unleveraged balance sheet with cash of A$45.3m and no debt at the end of 3QFY23 which helps to differentiate it compared to its peers in the Australian copper market.”

• “It has attractive financial metrics including an FY24 EV/Ebitda of 1.2x and FCF yield of 17%, which improves to 0.7x and 35%, respectively, at spot.”

Morgan Stanley on Fisher & Paykel (FPH):

• Equal-weight with NZ$24.12 target price

• “FPH's revenue expanded markedly during the pandemic when as much as 10 years of product demand was pulled forward. Following de-stocking of device inventory we see positive growth for consumables.”

• “EW: While revenue growth looks robust, margin issues lead us to lower EPS as shown (data box RHS). We stay EW due to expected long-term growth in Nasal High Flow Therapy.”

Goldman Sachs on APM Human Services (APM):

• Buy with $3.75 target price

• “APM has announced the award of ~15% of the Functional Assessments (FAS) contract … We believe this contract win, and others recently announced, demonstrates APM’s strong competitive position as a high quality provider of government services; we expect further contract wins to be a key catalyst moving forward.”

• “The current share price presents a compelling opportunity, and we reiterate our Buy rating with our 12m TP of A$3.75 offering 84% upside.”

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