From Hero to Xero

Hey Superheroes,

February reporting season is well underway with tech stocks taking a beating. The S&P/ASX All Technology Index plunged 10.6% this week as AI disruption fears spread across software stocks. Gold also dropped below the US$5,000 price point erasing gains over the last week due to a strengthening in the U.S. Dollar following the nomination of Kevin Warsh as the new Federal Reserve chair. 

Meanwhile, Bitcoin plummeted to roughly US$65,000 – half its late-2025 peak – driven by a tech-led “risk-off” sentiment, heavy ETF outflows, as well as market jitters over Kevin Warsh’s Fed nomination.

Closer to home, the Reserve Bank of Australia raised its Cash Rate target by 0.25%, thus ending the latest cycle of rate cutting.

Markets are jittery, but there’s always a story beneath the volatility.

Either way, here are this week’s biggest stories.

Xero gets hammered by AI fears 

This week, Xero (ASX:XRO) crashed 13% to AU$81.76. For a company once worth close to AU$200 per share, this represents a multi-year low. Xero hasn’t traded at these levels since early March 2023.

And here’s the kicker: it’s not even company-specific bad news that’s triggering the sell-off.

🤖 The AI problem 

The real culprit? Artificial intelligence.

Investors are increasingly worried that rapid advances in AI could undermine traditional software businesses by automating tasks faster and cheaper than existing platforms. And Xero, as a premium-priced accounting software platform, is right in the firing line.

The concern intensified this week after Xero’s CEO Sukhinder Singh Cassidy claimed that AI tools like Anthropic’s Claude Code “can’t easily replicate” what Xero offers.

Challenge accepted, apparently.

One tech journalist put that claim to the test over a morning coffee and used Claude Code to build a working clone of Xero’s core features in just 23 minutes. The AI-built alternative – dubbed “OpenBooks” – replicated invoicing, bank reconciliation, payroll, expense management and reporting… all for free (or under $60 annually if hosted).

While the journalist admitted maintaining such a system would be “a full-time job,” the exercise highlighted exactly what’s spooking investors: AI is making it easier than ever to replicate software that was once considered defensible.

💸 What the numbers say 

Despite the fear-driven sell-off, Xero actually posted some encouraging updates this week. The company highlighted strong AI progress, with over 2 million subscribers now using AI-powered features and 300,000 using newer capabilities like document extraction and cashflow prediction.

Xero’s internal assistant JAX is resolving 97% of help sessions without a support ticket, and customers using automated features are saving an average of 22 hours per month.

But none of that mattered. The market wants proof that Xero can turn growth into profits while fending off AI competition. Brokers remain split – Macquarie has an outperform rating with a AU$234 price target, while Jefferies cut its target to AU$101 citing margin pressure.

Until there’s clarity on how software companies defend their moats against AI disruption, volatility may remain elevated.

Disney picks its next king 

Disney (NYSE:DIS) finally has a new CEO – and this time, they’re hoping to avoid the drama of last time.

Josh D’Amaro, the 54-year-old chief of Disney’s theme parks and resorts division, will take over from Bob Iger on March 18. It’s a carefully orchestrated succession after Iger’s last pick, Bob Chapek, was forced out in 2022 after just two years on the job.

🎢 Parks guy runs the Magic Kingdom

D’Amaro has been with Disney since 1998 and has led Disney Experiences since 2020, overseeing the company’s theme parks, cruises and resorts. Under his watch, the division topped US$10 billion in revenue for the first time in the most recent quarter.

He’s also spearheaded Disney’s US$60 billion investment into expanding its parks and cruise ships – a critical growth engine as streaming margins remain under pressure.

Meanwhile, Dana Walden, who was the other frontrunner for the top job, will step into the newly created role of chief creative officer, overseeing content strategy across Disney’s platforms.

Investors are lukewarm on Disney. The stock is down over the past year, but the most recent quarter beat analyst projections. Investors will be watching whether D’Amaro’s experience in the high-margin, experiential side of the business can translate to success as streaming matures.

🔦 Some other things we’re shining the Spotlight on: 

OPENAI LAUNCHES FRONTIER: OpenAI unveiled Frontier, a new product that coordinates AI agents across businesses like a “bot hive mind.” The tool allows agents handling different tasks to share knowledge and act like teammates. Commonwealth Bank (ASX:CBA) and Intuit (NASDAQ:INTU) are already trialing it, posing a direct threat to software companies like Atlassian (NASDAQ:TEAM) and Salesforce (NYSE:CRM).

NEWS CORP BEATS REVENUE ESTIMATES: News Corp (ASX:NWS and NASDAQ:NWS) posted a 6% lift in Q2 revenue to US$2.36 billion, but net income fell 21% to US$242 million. CEO Robert Thomson took a swipe at AI, asking “what is the point of acquiring cutting-edge semiconductors if they are being deployed to repurpose gormless, factless, feckless content sets?”

RIO WALKS AWAY FROM GLENCORE MEGA-MERGER: Rio Tinto (ASX:RIO and NYSE:RIO) has walked away from talks to acquire Glencore, ending an 18-month saga that would have created a US$260 billion mining giant. The two sides couldn’t agree on valuation. Rio shares fell 5.56% on Thursday, while Glencore dropped as much as 11% (On the London Stock Exchange).

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