Here are 5 ASX stocks vulnerable to AI: Should you sell them?

Let’s take a look at some ASX stocks vulnerable to AI. Because right now, investors are focused on stocks that could win from AI, and even though some companies will win, there will also be losers too. Those who won’t see AI is a threat, until competitors that adopted AI are 100x bigger than them. Others will try, but will be fighting an uphill battle that they may not be able to surmount.

Don’t dismiss the possibility that companies can just stick to their knitting as they know best now. Just look at Chegg, an online service that offers textbook rentals, homework help and tutoring.

It has seen users and traffic plunge as students wanting to get spoon-fed answers to their coursework because its far easier than studying help with coursework turn to ChatGPT where they can get for free what they used to have to pay A$25 a month for. Even Google has seen a drop in traffic due to ChatGPT, and there’s debate as to whether or not it could go the way of Kodak (in other words bust) if it doesn’t adapt.

If not even Google is safe, and even when the only public AI application is ChatGPT, it is difficult to see any company that is. But let’s look at a few ASX stocks that are vulnerable to AI.

This is not intended to be an exhaustive list, but we think no one is thinking about AI as a threat to these business (at least not to the extent it is reflected in their share prices). Even so, some of these businesses could still be winners…if they play their cards right. Without any further ado, here we go.

5 ASX stocks vulnerable to AI

Kelly Partners (ASX:KPG)

See, we told you we’d be talking about companies you would not have thought of as vulnerable to artificial intelligence. With a share price gain of over 1,000%, being a company that is founder led (by Brett Kelly), has a founder with significant skin in the game (nearly half of the company) and one of the few that gives annual letters to shareholders like Berkshire Hathaway and Amazon do; what is not to love? Did you know Brett Kelly has exchanged letters with Warren Buffett and has a cardboard cutout of him in his office?

Kelly Partners is an accounting firm providing specialist accounting, tax, business advisory, private wealth and financial advice. Did you know it has accountants who are specialists in McDonalds franchise accounting? Trust us, it is unique accounting.

Xero has not displaced traditional accountants, just helped them do their job better. And perhaps, artificial intelligence could have the same impact – just help people do their jobs better. Yet, if nothing else, KPG may fall behind its peers if its competitors are able to cut their costs (including staff) and do the same with less.

AMP (ASX:AMP)

This company has more problems than just AI. But as above, the company may need to do more with less. To be fair, the company is responding to artificial intelligence. In its adviser platform North, it has deployed a ‘first in market’ generative AI-powered feature that automatically transcribes and organises client meeting notes. But will this be enough to survive the onset of AI? Only time will tell.

Soul Pattinson (ASX:SOL)

To clarify, we are focusing on the company at it is now – not the merged company it will be when it will have Brickworks in its fold. Our concern is: Will this investment company correctly perceive the companies that will win from artificial intelligence and those that will lose? Its own future will depend on it.

Part of this company’s investor relation story is its incredible long-term track record. Over the last 20 years, SOL has reported Total Shareholder Return of 11.7% per annum, outperforming the All Ords by 3%. If you’d invested A$1,000 in the company in 2004, you’d now have $9,200 whilst you’d have just $5,340 if you invested in an All Ords ETF.

It will need to make the right choices on artificial intelligence if this record is to be maintained.

Nuix (ASX:NXL)

This may be a controversial take – some may say this company will be a winner from artificial intelligence. It is difficult to argue at first glance because AI-style processing is this business’ bread and butter – it helped sort through the Panama Papers! Nonetheless the Panama Papers was back in 2016 – 6 years before ChatGPT was a thing.

The rise of artificial intelligence is not just a threat to companies that think they can get away with not adopting it. But also to those who may not be able to match competitors on price or output. Consider the rise of Google.

Many would say Google displaced Ask Jeeves and Yahoo, but it displaced libraries and newspapers – it democratised and made free what people used to have to pay for. With that in mind, a question we have about Nuix is will it still be able to stand above its peers (forever)? Time will tell.

Freelancer (ASX:FLN)

Freelancer’s flagship platform has a workforce of over 70m users and 2,700 skills. The company is integrating artificial intelligence into its platform, and some of its workers have artificial intelligence skills. But the question is whether or not people will go out of their way to pay for things they may be able to get for free. Why pay to have image creation by someone using Photoshop when you can just use a free tool to make an image?

This business may ultimately prevail, but it remains to be seen that even if it will, investors will ever embrace it.

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