First Sentier Investors’ Dushko Bajic explains why fundamentals still matter, and shares two stocks with massive potential.
Australia’s technology market has entered beast mode.
Over the past 12 months, the ASX All Technology Index has surged 27.45%, nearly tripling the return of the broader ASX 200, which gained 10.2% over the same period, according to data from Market Index.
With AI excitement running hot, rate cut speculation building, and investor sentiment on the rebound, tech continues to surge. So is this rally grounded in fundamentals, or just frothy sentiment? And with valuations stretched, can the sector keep climbing?
To make sense of the hype versus reality, we spoke with Dushko Bajic, Head of Australian Equities Growth at First Sentier Investors, to unpack what’s really driving the sector, where the overlooked risks lie, and which two ASX-listed names he believes are built for long-term compounding.

Dushko Bajic, Head of Australian Equities Growth, First Sentier Investors
Winners and losers: A sector divided
On the surface, tech looks red-hot. But underneath, it’s a very mixed story. A handful of winners have driven most of the gains; others have been quietly hammered.
“Individual stocks have experienced a range of outcomes driven primarily by their fundamental performances,” explains Bajic.
In the financial year just ending, TechnologyOne (ASX: TNE) and Pro Medicus (ASX: PME) have more than doubled. Xero (ASX: XRO) is up 50%. But others haven’t fared as well -SiteMinder (ASX: SDR) is down 9%, NextDC (ASX: NXT) has slipped 23%, and Audinate (ASX: AD8) has fallen 57%.
This isn’t a rising tide lifting all boats - companies are being rewarded (or punished) on their results, and a good understanding of the different businesses is required to avoid the duds.
High multiples, misunderstood quality
Yes, valuations are elevated. Pro Medicus sits on a PE just shy of 300. TechnologyOne is around 100. That’s enough to cause nosebleeds for traditional investors looking at near-term earnings multiples.
But Bajic urges investors to look beyond the headline numbers.
“The term ‘tech’ covers a broad range of sectors... making generalisations ineffective,” he says.
And, just as CSL, ResMed and Cochlear don’t compete in the same corner of healthcare, ASX tech is not a monolith.
Some names are selling average products into saturated markets. Others, like Xero, WiseTech, Technology One and Pro Medicus are building products that customers adore.
But what sets them apart? Bajic highlights a common playbook:
- Rapid growth via market share gains based on superior products in large addressable markets
- All are genuine SaaS businesses with relatively predictable recurring revenues
- They provide the core operating system or other critical services for their customers
- Established platforms that enable seamless integration of additional products creating a powerful moat and high margin growth opportunities
- Strong unit economics with high gross margins and low customer acquisition costs
- Prioritised spending on product design and development over sales and marketing
Dushko Bajic
What could derail the rally?
With high expectations comes risk. And in this part of the market, the margin for error is razor thin.
“The key risks include failing to deliver on high growth expectations. Any miss is disproportionately punished," he says.
He also points to macro risks, particularly another unexpected spike in real bond yields, as a potential catalyst for a growth-to-value rotation, much like in 2022.
Still, he argues that obsessing over current P/Es misses the long game.
“In our experience, these metrics are a flawed approach to identifying value.
Basing a valuation on current earnings for a company highly likely to maintain strong earnings growth for the next decade and beyond has resulted in a great many missed opportunities," he says.
The world-class names hiding on the ASX
Despite the ASX’s reputation as a mining-and-banks index, Bajic believes Australia (and New Zealand) has quietly produced some global tech leaders.
In software, WiseTech Global and Pro Medicus stand out.
“Their products are indisputably recognised as world leaders. While they charge premium prices, they continue to grow market share rapidly due to the productivity benefits they deliver," he says.
He also highlights medtech leaders like Cochlear, ResMed, and Fisher & Paykel Healthcare as long-term compounders with durable global moats.
The next wave of growth
Where does the opportunity go from here?
Bajic sees four big levers for the top-tier ASX tech names:
- Global expansion, drive by momentum in market share gains
- Continued product development - these companies reinvest substantial amount of profits back into improving the user experience
- M&A activity to add functionality faster than could be developed in-house
- The massive AI opportunity
"AI provides valuable opportunities to reduce product development costs, enhance functionality and improve customer experience. However, the biggest benefit AI provides these stocks is accelerating the shift from on premise to cloud based IT architecture by their clients, making their products a natural choice," he says.
The two stocks Bajic is backing
1. Xero (ASX: XRO)
Bajic rates Xero CEO Sukhinder Singh-Cassidy for sharpening the company’s focus on its biggest opportunities while also reducing its cost base.
"Xero’s CEO Sukhinder Singh-Cassidy has done an outstanding job since starting two years ago improving efficiency, driving cultural change, upgrading senior management and providing a compelling strategy for long term profitable growth," he says.
The company is now focused on three core products - accounting, payroll, and payments - and three key markets: Australia, the UK, and the US. It’s the latter that excites Bajic most, where he believes Xero has the potential to turn things around in the world’s most important business market following years of underperformance.
"The USA in particular represents an enormous opportunity now that product gaps are filled, it has been customised to the local market and appropriate resources are being dedicated," says Bajic.
First Sentier sees Xero’s recent acquisition of the high growth US digital payments platform Melio is an inspired move, providing a significant step change to the prospects for US growth.
"While it provides much needed scale by tripling the revenue base, it more importantly provides a strong beachhead for growth in the enormous US digital payments sector that is multiples larger than the core accounting business," he says.
While digital payments is a highly competitive sector, integrating accounting with fully embedded payment functionality creates a compelling value proposition that stands apart from stand-alone offerings.

Xero is up 35% over the past year, and 105% in the past five years. Source: Market Index (as at 27 June 2025)
2. WiseTech Global (ASX: WTC)
WiseTech is universally recognised as the industry gold standard for global logistics software.
Its core platform, CargoWise One, now powers 14 of the world’s top 25 freight forwarders—double what it did five years ago. While it commands a premium price, customers continue to sign on due to its ability to reduce labour costs, minimise errors, and streamline global supply chains.
"While the software attracts scrutiny for its premium pricing, Bajic points out that it continues to win large customers at a rapid pace thanks to its ability to reduce labour costs, minimise errors and improve customer service.
"Now that Wisetech has cemented a dominant position in freight forwarding, it is now aggressively expanding into logical adjacencies such as customs, warehousing, landside logistics and trade," he says.
"The acquisition of US based peer E2open provides Wisetech with a strong foundation to extend their customer base to the shippers and cargo owners."

WiseTech is up 10% over the past year, and 400% in the past 5 years. Source: Market Index (as at 27 June 2025)
Has the ship sailed?
Australia’s tech sector might be in beast mode, but Bajic believes the combination of massive market opportunities and dominant competitive positions makes select names compelling opportunities for the decades to come.
“Their products are indisputably recognised as world leaders. While they charge premium prices that rise each year, they continue to grow market share rapidly due to the productivity benefits and cost savings they deliver to customers,” he says.
That said, Bajic knows momentum in growth stocks can reverse in a heartbeat. Staying vigilant is critical.
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