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AI stocks are overvalued, but that doesn\u2019t make the technology less capable. Image: Getty Images<\/p>\n\t\t\t\t\t\t\tPublished on\t\t\t\t\t\t<\/p>\n
\t\t\t\t\t\t\tJuly 27, 2026\n\t\t\t\t\t<\/p>\n
Opinion: Australia should play to its strengths in the AI era, leveraging critical minerals and renewable energy while ensuring global tech giants pay their fair share of tax, argues AirTree co-founder Daniel Petre<\/p>\n
AI stocks are overvalued, but that doesn\u2019t make the technology less capable. Image: Getty Images<\/p>\n
AI is the biggest technological shift in modern history. It\u2019s already smarter than us at a growing list of tasks, touches every part of life, and comes from a set of providers with wildly different levels of caution about what they\u2019re building. And it\u2019s improving faster than any technology before it \u2013 and we really do not have a choice to opt out.\u00a0<\/p>\n
The pace is the story<\/p>\n
The increase in capability of two attributes of AI models helps provide a view as to how quickly things are advancing.\u00a0<\/p>\n
These two proxies show how fast this technology is moving when looking at the parameters and context window. Parameters \u2013 one crude measure of model scale \u2013 went from 175 billion in 2021 to around three trillion today. <\/p>\n
That is a 16-fold increase in five years. Meanwhile, the context window or how much information a model can hold at once, went from 3,000 tokens to 3 million. A 1,000-fold jump, in other words.<\/p>\n
AI breakthroughs<\/p>\n
Now, let\u2019s look at five real examples that offer five different flavours of powerful AI.<\/p>\n
AlphaFold\u00a0cracked a 50-year open problem<\/a>\u00a0in biology, which is how proteins fold. Its creators won the 2024 Nobel Prize in Chemistry. The database now covers 200 million protein structures, and two million researchers use it. Decades of expected science have been compressed into a few years.<\/p>\n Gemini Deep Think\u00a0took gold at the 2025 International Mathematical Olympiad<\/a> \u2013 same problems, same time limit as the human contestants. A year earlier, DeepMind\u2019s best system only managed silver. So, from silver to gold in 12 months.<\/p>\n Insilico Medicine\u2019s INS018_055\u00a0is the first drug where AI found both the target and the molecule. It moved\u00a0from novel target discovery to Phase I<\/a>\u00a0in under 30 months, about half the time of traditional drug discovery. It has since progressed to Phase II.<\/p>\n DeepMind\u2019s GraphCast\u00a0beat the world\u2019s best physics-based weather model<\/a> on 90 per cent of test variables: a full global forecast in under a minute, on one machine, at roughly 1,000 times less energy. Weather forecasting was supposed to require physics simulation. AI beat physics at its own game.<\/p>\n As of April 2026, 75 per cent of\u00a0new code committed at Google<\/a>\u00a0is AI-generated and human-approved, up from 50 per cent months earlier. Microsoft sits at 20\u201330 per cent. This isn\u2019t a demo. It\u2019s production code at two of the biggest engineering shops on Earth, which makes it arguably the most consequential number on this list.<\/p>\n So in summary, AI solved a scientific mystery; defeated elite humans under contest rules; compressed an industrial pipeline for drug development; beat mature physics models on their own turf; and is now running production code at scale. That\u2019s not one trick repeated five times.<\/p>\n Yes, it\u2019s a bubble. No, that doesn\u2019t matter.<\/p>\n Valuations of AI stocks are currently absurd and due for a correction<\/a>. Fine. A valuation crash doesn\u2019t make the technology less capable. Don\u2019t confuse the market\u2019s mood swings with the underlying capability curve. That curve keeps climbing regardless of what happens to anyone\u2019s share price.<\/p>\n So who actually wins?<\/p>\n The real AI stack \u2013 chips, memory, LLMs, data centres \u2013 costs tens of billions of dollars just to enter, let alone win. That capital intensity narrows the field fast. The winners are the US and China, with Taiwan in a supporting role. The US and China are in a fight to the death over this.\u00a0<\/p>\n Also anyone assuming the US wins by default hasn\u2019t been watching how hard China is pushing. China is producing LLMs that are lower cost to run and provide business users way more input into how the model can be modified to their particular circumstances.\u00a0<\/p>\n Whether the US can continue to dominate frontier models while China hoovers up other parts of the market is far from obvious.<\/p>\n Where does that leave Australia?<\/p>\n Nowhere near the frontier of the core technology. We\u2019ll produce a handful of great AI-native apps and tools, but we will never be a serious player in chips or LLMs \u2014 we don\u2019t have the capital or the scale. We are, and will remain, a user of other people\u2019s technology.<\/p>\n That\u2019s not a death sentence. Other than a fortunate economy underpinned by mining (and to some extent agriculture) we hold two real AI domain cards: critical minerals, where global demand is exploding and we\u2019re genuinely positioned to be a major supplier, and cheap, stable renewable energy, which makes us an attractive base for AI companies in one of the more stable corners of Asia.<\/p>\n Playing those cards well means two things. First, capture the value \u2014 don\u2019t just host the infrastructure and watch someone else take the margin. Second, ramp up serious R&D, government and private, aimed at where the world is going, not where it\u2019s been. AI-designed and built medicines that can be manufactured locally in globally cost competitive, mainly robotic, drug manufacturing facilities is just one obvious target.<\/p>\n The tax question nobody wants to ask<\/p>\n Even assuming we harness these opportunities, AI will probably destroy more jobs<\/a> than it creates.\u00a0<\/p>\n That means we need a tax base solid enough to fund the next wave of opportunity and support the people this shift leaves behind.\u00a0<\/p>\n Put bluntly: tax the robots. Get a fair share of the revenue global AI players extract from Australia. They\u2019ll claim it\u2019s impossible. It isn\u2019t. In a world where a handful of companies control tens of trillions in value, they need markets like Australia more than we need any single one of them.<\/p>\n The upside is real<\/p>\n Done right, this AI era cures diseases we\u2019d written off as incurable, drives down the cost of goods and services, and gives every Australian access to expert-level advice on demand.<\/p>\n This would amount to a genuine lift in personal productivity and national competitiveness, inside an economy that\u2019s fairer than the one we have now.<\/p>\n We get to build that future. It just takes focusing on the signal, not the noise.*<\/p>\n *Oh and my friend Claude\u00a0helped me pull some of the data together in this piece.<\/p>\n Daniel Petre AO is the co-founder and Partner Emeritus of AirTree Ventures, one of Australia\u2019s leading venture capital firms. He has spent more than three decades in technology, investment and innovation, including senior roles at Microsoft.<\/p>\n Want to see more Forbes articles on your feed?\u00a0Tap here to make Forbes Australia a preferred source on Google.<\/a><\/p>\n Look back on the week that was with hand-picked articles from Australia and around the world.\u00a0Sign up to the Forbes Australia newsletter here<\/a>\u00a0or\u00a0become a member here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"Published on July 27, 2026 Opinion: Australia should play to its strengths in the AI era, leveraging critical…\n","protected":false},"author":2,"featured_media":826291,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[256,67083,64,63,44,1996],"class_list":["post-826290","post","type-post","status-publish","format-standard","has-post-thumbnail","category-australia","tag-ai","tag-ai-bubble","tag-au","tag-australia","tag-news","tag-tech"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/826290","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=826290"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/826290\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/826291"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=826290"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=826290"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=826290"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}