The term encompasses a group of Australia’s better known technology stocks: WiseTech Global Ltd., Appen Ltd., Altium Ltd., Afterpay Touch Group Ltd. and Xero Ltd. And they’ve been good bets so far: WAAAX shares have outperformed their China and U.S. peers as investors sought exposure to the global rally that has sent U.S. tech equities soaring since 2017.

The jump is all thanks to the shift to cloud-based technology and Australia’s plan to open 5G networks, according to

Camille Simeon, a Sydney-based investment manager at Aberdeen Standard Investments. “Compared to what else is on offer in the Australian market, the WAAAX names have a very attractive growth outlook,” she said.

Another reason for the rally is that investors are seeing the success of the
FAANGs in the U.S. and are hoping to replicate those gains, according to John Athanasiou, chief executive officer at Red Leaf Securities. But the Australian stocks will need to back up the momentum with revenue to keep the rally going, he said.

“With all rallies, eventually reality has to kick in,” Athanasiou said by phone. “The fundamentals have to be proven.”

A breakdown of how the stocks in the WAAAX complex have done:

WiseTech Global, a logistics software maker, has risen more than 110 percent in the past year, sending its market value to A$7 billion ($5 billion)

Appen, which specializes in artificial intelligence, has swelled 152 percent, with its market cap reaching A$2.9 billion

Altium, a design software maker for microchip companies, has risen 55 percent and is now worth A$4.5 billion

Afterpay Touch, a buy-now, pay-later service popular with millennials that’s expanding into the U.S. and Europe, has soared almost 200 percent, and its value stands at A$4.9 billion

Xero, which makes cloud-based accounting software, has climbed 43 percent and is worth $A6.9 billion.

To be sure, some of the companies aren’t yet profitable and investors need to look at different measures to validate their potential. For Xero, they’re focusing on
cash flow as the firm aims to break even within its current cash balance. Afterpay Touch discusses in its corporate filings the number of consumers and retailers adopting its platform while trying to minimize the proportion of its revenue from late fees.

Tech Flops?

The industry has also weathered some big-name letdowns. GetSwift Ltd., a maker of delivery software, soared more than 1,000 percent in the year following its initial public offering at the end of 2016, only to see its stock price
collapse after the company disclosed that some of its contracts were only for trial periods.

Video-marketing company Big Un Ltd., whose shares surged almost 1,500 percent in 2017, was delisted last year after
revelations that some of its customers paid for services with money advanced by one of its investors.

Australia hasn’t traditionally been known for tech stocks as financials, energy and mining account for

more than half of the benchmark S&P/ASX 200 Index. Tech makes up less than 3 percent of the gauge, compared with more than 20 percent for the S&P 500 Index. ASX Ltd. has seen 67 initial public offerings of tech companies over the last three years, collectively raising A$1.46 billion, a spokesperson for the bourse said, citing Dealogic. DM