ASX investors urged to ditch consumer stocks for AI and mining as another RBA interest rate rise looms

Share market investors are being urged to treat Australia as a two-speed economy, with higher interest rates hurting households, while a boom in infrastructure, mining and artificial intelligence investment creates a new class of corporate winners.

The emerging split between the weak household sector and strong investment-led economy means investors should favour companies exposed to business spending rather than household consumption as the Reserve Bank considers another rate rise.

Money markets on Wednesday lifted the probability of a September rate increase to 65 per cent after stronger-than-expected GDP growth bolstered expectations the RBA will deliver at least one more increase in 2026.

Macquarie analysts expect another rate rise to widen the gap between share market winners and losers.

“The household economy is slowing through mortgage applications, residential sales, discretionary volumes and trading down, but credit losses remain low,” Macquarie said.

“The investment economy is considerably stronger, with business lending, infrastructure, defence, mining services and data-centre spending supporting activity. The cash rate is restraining the consumer, while contracted, government-funded and AI-related investment is proving harder to slow.”

The split is creating opportunities among industrial companies such as data-centre developer Goodman Group and property giant Stockland, Macquarie said.

On the other hand, Macquarie’s Australian equities research team does not think it’s time to buy retailers such as JB Hi-Fi, arguing there’s no evidence to suggest the RBA will take its foot off consumers’ throats and ease rates.

“(August’s profit) results are yesterday’s news,” Macquarie said. “The rear-view mirror is supportive, but the market now faces slower household activity, restrictive Australian policy, plus global tightening.

“We see the RBA remaining on a restrictive hold, and that means the earnings pressure remains for consumer cyclicals.”

The S&P/ASX 200 Consumer Discretionary sector, which contains 23 retailers, has slumped 10.2 per cent over the past month, versus a 0.1 per cent gain for the broader market.

In contrast, the strongest sector over the past month is materials. It has jumped 9.5 per cent as large miners are seen as winners from inflation and infrastructure investment.

Stock picker backs three businesses to win

Bell Asset Management Portfolio Manager Tim Johnstone agrees the local economy is dividing between household-facing losers and investment-led winners.

“This reporting season reaffirmed our view that the economy is in the midst of a rotation, whereby investment spending will be the key driver of economic growth,” says Johnstone.

“The strongest results were generally concentrated in businesses exposed to resources investment, infrastructure spending and electrification rather than household consumption.”

The stock picker names three businesses he thinks are wealth winners given the mixed economic outlook.

COG Financial Services lends to small industrial businesses, including construction companies, and finances vehicles.

“We see it as a major beneficiary of the electrical vehicle penetration,” says Johnstone.

According to the fund manager, COG Financial’s vehicle financing business posted 51 per cent revenue growth over financial year 2026. The shares also trade on just 9 times Johnstone’s estimate of profits over financial year 2027.

Another favourite is gold miner Vault Minerals, created by the July merger of Vault and Genesis Minerals.

“We think the combined group is an attractive investment proposition as it will give investors exposure to the third largest gold producer in Australia trading at a substantial discount to the current cohort of large cap gold producers,” says Johnstone.

The broader thesis is that inflation and business investment in selected sectors will continue to drive returns, rather than a recovery in household spending.

“Mining services, engineering, industrial technology and selected energy transition names continued to report healthy backlogs and resilient demand, highlighting an economy increasingly supported by capital investment rather than consumer spending,” he said.

The AI infrastructure trade

Another leg of the investment boom could come from AI infrastructure, with two high-profile companies targeting ASX listings later this year.

Firmus is an AI data centre business tipped to list on the ASX in October at a $15 billion valuation. It’s co-founded by Oliver Curtis, the husband of public relations guru Roxy Jacenko.

SharonAI, founded in only 2024 by James Manning, Nick Hughes-Jones, and Andrew Leece, has already raced to a $US2.4 billion valuation on the Nasdaq thanks to the investment mania for AI infrastructure. It’s targeting a secondary listing on the ASX later in 2026.

“Growth is rotating away from consumer-funded demand toward business investment, including AI capex, with labour, component availability, power and funding now constraining parts of the investment economy more than demand,” Macquarie said.

Amid the hype, investors have yet to be rewarded across the existing cohort of ASX-listed data-centre stocks.

Shares in NextDC have tumbled 22 per cent to $12.72 on Wednesday, despite the company sitting at the centre of the data-centre and AI investment boom.

Investment research group Morningstar values the shares at $15.60.

Analyst Dan Baker says investors need to balance the strong revenue growth outlook against the massive investment costs that are likely to mean it prints losses for the next four years.

“NextDC benefits from industry trends, including increasing use of cloud computing and artificial intelligence, that are driving exponential growth in data creation,” Baker says.

Elsewhere, rival data centre operator Macquarie Technology has lost 6 per cent over the past year as investors fret about the cost of its plans to big spend on new infrastructure.

Property, income

Beyond AI, professional investors are also looking to property, infrastructure and income-producing assets for returns as the economy slows.

Daryl Wilson is the co-founder of Affluence Funds Management and a former director of Cromwell Property Group.

He says industrial, commercial or residential property groups like Lendlease and Dexus are good value as they’re set to deliver returns on investments.

“The worst is over (for Lendlease), he says. “Cash is starting to come in and the debt situation will look much better when confirmed sales are settled. Medium-term construction and development pipeline looking very positive.”

Wilson also considers Dexus “very cheap”, with the stock offering a dividend yield of about 5 to 6 per cent.

“It’s been held back a little by some dramas in their funds management business, but we think they’ll get resolved,” he says.