If you're watching the ASX tech stocks space, you'll know the sector is buzzing with innovation and growth potential. But it also facing some unique challenges.

Tech is a fast changing sector, that's for sure. Yesterday's trend is today's dinosaur age over in the tech world.

But there's some emerging themes that need critical discussion, including, but certainly not limited too, artificial intelligence (AI), and the impact it has on ASX tech stocks. Here's what you need to know right now.

Why look at ASX tech stocks in the first place?

Technology is no longer just a nice to have feature in life. It's become central to how businesses operate and grow, and ASX tech stocks have benefited heavily. Think about it: without reliable software, hardware, and digital infrastructure, companies struggle to function efficiently in this "modern world".

According to CommSec, the technology sector is often the engine of growth in the economy, with innovations that create new industries and reshape old ones.

Technology is central to the operation of any company. You may not have said this 40-50 years ago. But now if your computer hardware, software and controls aren't functioning then the company isn't functioning – or at least not efficiently.

But it's not just about having the technology to run your business, it's about growth. And Information Technology is a sector usually identified with the growth of companies, industries and the broader economy.

Australia's tech sector is actually pretty small compared to global giants. We have just 11 ASX tech stocks in the ASX 200, and 19 across the broader ASX 300.

For comparison, the US tech sector features over 60 companies with trillions (yes, trillions) in market value.

For those interested in the sector versus individual names, the Betashares S&P/ASX Australian Technology ETF (ASX: ATEC) offers investors a neat way to tap into this dynamic slice of the market without having to pick individual winners. It tracks the overall performance of the  S&P/ASX All Technology Index.

But whether you're interested in the nuances of ASX tech stocks, or simply interested in the sector, one thing is for sure: tech is behind the innovation of Australia's economy. Sit on that for a second.

So what's driving the tech sector now?

AI is front and centre. You'd have to have been under a rock not to have seen at least one headline talking about AI and it's role with ASX tech stocks.

The team at TAMIM Asset Management have been all over the emerging AI trends in tech for some time now.

The firm recently talked about some comments made by Sundar Pichai, CEO of Google, about how the technology is been woven into, well, technology itself.

Pichai likened AI to revolutionary technologies like electricity or fire, both 'innovations' that reshaped entire industries. According to TAMIM:

Pichai speaks at length about Gemini (Google's generative AI suite), which integrates images, text, code, audio, and video. This reflects the next phase of AI: systems that are not just smart in a narrow domain but fluent across modes.

For investors, this underscores the increasing need for compute power, bandwidth, and intelligent orchestration. It also speaks to the rise of converged infrastructure, where cloud, edge, and on-prem systems are optimised in real time.

This is not science fiction. It's already reshaping supply chains, industrial automation, and enterprise IT. We believe infrastructure businesses that understand AI workloads and deliver low-latency, high-availability environments will be the next secular winners.

That means the real winners won't just be the flashy AI startups, but also the companies powering the digital backbone. Think of those data centre operators, semiconductor manufacturers, and providers of computing software.

Meanwhile, Montaka Global Investments also mentioned how AI is making its way into the computer coding domain, through so-called "coding agents".

Coding agents are remarkably powerful already, but it's also likely that the hype around these tools has extended beyond reality.

Montaka has interviewed senior software developers and they suggest these tools are far from capable of safely handling complex software in live production environments where systems and applications are deployed to end users….

…And given the rapid pace of advancements in AI today, the future looks bright for software developer productivity…

…This, of course, is great news for shareholders of tech companies that currently spend billions of dollars on research and development to try and build the next generation of products to extend their growth horizons.

It would seem that AI is taking its grip over tech, and this will no doubt have some impact on ASX tech stocks as we move forward.

Foolish takeaway

ASX tech stocks continue to be at the spear of the tip when it comes to innovation here in Australia. And with that, AI continues to dominate the investment narrative.

What the long-term outcomes from all of this fever will be, only time will tell. Until then, it's going to be an exciting time seeing the list of scenarios created by all of this investment into the sector.