Blood in the streets? 2 ASX growth stocks Jun Bei Liu is loading up on (and one she’d avoid)

Let’s face it - unless you’re a miracle market timer, your growth portfolio probably feels pretty bruised right now.

After the brutal sell-off in ASX growth stocks over the past several weeks, many of us have been scrambling to understand what artificial intelligence (AI) really means for companies that once felt like gifts from the financial heavens, particularly software-as-a-service (SaaS) stocks.

Software valuations have compressed, investors are questioning the durability of long-duration earnings, and the market narrative has shifted remarkably quickly - from AI opportunity to AI disruption.

Some have even started referring to the sell-off as a potential “SaaSpocalypse”.

So, we turned to one of Australia’s most prominent growth investors - and one of the earliest backers of Pro Medicus (ASX: PME) - TenCap’s Co-founder and Lead Portfolio Manager, Jun Bei Liu, to understand what’s really happening beneath the current panic.

“I think the term ‘SaaSpocalypse’ is catchy, but it oversimplifies what’s actually happening,” Liu says.

“We’re not looking at a structural collapse in quality software and med-tech businesses. We’re looking at a market that is repricing duration risk and questioning earnings durability.”

That repricing has pushed some high-quality growth companies sharply lower - but Liu argues it has also created selective opportunities.

The key, she says, is understanding which businesses genuinely possess durable competitive advantages.

Not all “tech” is created equal

One of Liu’s biggest concerns is that investors are grouping very different businesses under the same “tech” narrative.

Two companies she highlights - Pro Medicus and Cochlear (ASX: COH) - illustrate why that can be misleading.

“PME and COH are not momentum SaaS trades," she argues.

Pro Medicus provides imaging platforms used by hospitals and radiology groups to manage complex diagnostic workflows. Once integrated into hospital systems, those platforms become deeply embedded in clinical infrastructure.

“Hospitals cannot function efficiently without imaging platforms. The software improves workflow, reduces diagnostic time, and integrates into core hospital systems. That’s not discretionary spend.”

Cochlear, meanwhile, sits in an entirely different category.

“COH isn’t SaaS at all. It’s a medical device company built on decades of R&D, regulatory approvals, and high switching costs.”

In other words, while both companies often trade alongside growth stocks, their economic drivers and competitive moats look very different.

The AI question investors should really be asking

Much of the current fear revolves around the idea that AI could displace traditional software platforms.

But Liu believes the real question is more nuanced, “AI disruption risk is real in some areas of tech,” she says.

“But the key question is: does AI displace them, or strengthen their value proposition?”

In Pro Medicus’ case, she believes the answer couldn't be clearer.

Medical imaging is becoming increasingly complex, and radiologist shortages remain a persistent challenge globally. As imaging volumes grow, hospitals need faster processing, better workflow management and scalable platforms.

“AI actually increases imaging complexity and volume and that enhances the need for speed, workflow optimisation and scalable infrastructure," Liu notes.

For Cochlear, AI may improve diagnostics and patient fitting processes, but it doesn’t threaten the core technology.

“AI might improve diagnostics and fitting … but it doesn’t replace implant technology or decades of R&D."

Where valuation and earnings durability diverge

That doesn’t mean Liu is broadly bullish across the entire growth sector. In fact, like TMS Capital's Ben Clark, she argues investors need to be highly selective.

PME and COH share several key traits she looks for in this environment: structural demand, proprietary intellectual property, high switching costs and pricing power - and in Cochlear’s case, actual hardware.

But not every growth company enjoys those advantages.

SiteMinder (ASX: SDR) is one example where she sees greater disruption risk and prefers to avoid for now.

“It’s a good business. But it operates in a more competitive, travel-linked ecosystem where customer switching is easier and pricing power is less entrenched."

Unlike hospital imaging platforms, hotel distribution software faces lower barriers to entry - particularly as AI lowers development costs.

“At elevated multiples, that combination can be vulnerable if growth slows even modestly."

2 growth names starting to look attractive

Despite the broader caution, Liu believes the recent sell-off has created opportunities in select global healthcare franchises - most notably the two companies already mentioned.

Cochlear (COH)

Cochlear is a classic high-quality healthcare franchise that has been de-rated on short-term earnings softness ahead of a major processor upgrade cycle. The long-term story, however, remains intact.

Global penetration rates are still relatively low, demographics remain supportive, and the company benefits from a large installed base that drives recurring upgrades and services revenue.

“At these levels, you’re being paid for short-term noise … while owning a global leader with pricing power and strong cash generation."

Pro Medicus (PME)

Pro Medicus sits at the intersection of healthcare infrastructure and scalable software.

The company continues to win large hospital contracts in the United States and operates with exceptional margins and a capital-light model.

“It’s not cheap optically, but quality rarely is,” Liu contends, adding that Pro Medicus stands to benefit strongly from the increasing use of AI across its software and workflows.

Will they go to record highs again?

To reiterate, Liu isn’t calling this sell-off a blanket green light for growth investors.

“I wouldn’t frame it as ‘back up the truck’ across the entire sector,” she warns.

“But selectively, yes - I think this is a very attractive entry point into global healthcare and infrastructure-grade software franchises.”

Whether Pro Medicus and Cochlear can re-rate to new highs, she says, comes down to execution - and a handful of proof points the market will want to see.

For Pro Medicus, that means continued contract wins translating into revenue over the coming periods, reinforcing that its platform remains mission-critical and increasingly central to hospital workflows.

For Cochlear, the focus is on margins stabilising and operating leverage returning as near-term earnings noise fades and the upgrade cycle plays out.

“If those things play out, I absolutely expect these businesses to trade at new highs again within 2–3 years.

High return on invested capital global franchises tend to compound over time."

Her finishing point leans on experience: markets overshoot in both directions - and right now, sentiment is pricing disruption risk aggressively, and perhaps very wrongly.