Why investors should reduce their exposure to ASX tech shares in 2022: expert

Rising interest rates will put pressure on companies valued for their far future potential earnings.

Two brokers pointing and analysing a share price.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

ASX tech shares, as whole, haven't exactly shot the lights out in 2022.

To say the least.

Here's what we mean.

Since the opening bell on 4 January, the S&P/ASX 200 Index (ASX: XJO) has lost 5.4%.

That's not great.

But it sure beats the 22.1% year-to-date loss posted by the S&P/ASX All Technology Index (ASX: XTX).

Which sectors haven gained while ASX tech shares have tumbled?

So, which sectors have been making hay even as ASX tech shares have come under selling pressure?

With skyrocketing energy and commodities prices, you likely won't be surprised by the answer.

Year-to-date the S&P/ASX 200 Resource Index (ASX: XJR) has gained 2.2%. Not at all bad in less than 3 months' time.

Yet the S&P/ASX 200 Energy Index (ASX: XEJ) has raced far higher, gaining 15.3% so far in 2022.

Does that mean the boat has sailed on energy and resource shares and investors should increase their exposure to ASX tech shares?

Not according Jessica Amir, Saxo Markets Australian market strategist.

Time to run the slide rule over your portfolio?

According to Amir, "The Aussie market is searching for direction, and has tracked sideways for 3-months now, awaiting the next big catalyst."

"When it comes to the central banks, markets are still in the dark and want to price in how many rate rises will be made in the US, and in Australia," she said.

Which brings us back to ASX tech shares.

According to Amir, "Given profits will be squeezed when rates rise, money has continued to come out of tech … this year and instead go into energy – oil, gas and coal – stocks."

Amir continued:

The Australian Bureau of Statistics alluded to companies' profit growth being squeezed, from Omicron, higher wages and oil prices. Just imagine what will happen if rates rise 4 times to companies that were born from zero interest rates?

This is why we advocate for investors to reduce their exposure to tech, and continue to favour commodities, given lack of supply and rising demand overtime.

ASX tech shares broadly led yesterday's rally. However, many of them are valued with far future earnings growth in mind, which could place them under renewed pressure as investors eye rate increases.

As the cost of money rises, some of those values may look increasingly stretched.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Technology Shares

A man in full American NFL playing kit crouches over with his arms across his chest in a defensive stance against a dark background.
Technology Shares

ASX 300 tech stock charges 7% higher to record high on stellar results

This tech stock delivered another impressive result this morning.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Technology Shares

Up 87% in 12 months: Why this ASX tech share is still a top buy

This technology business still has loads of potential, according to a fund manager.

Read more »

a group of three cybersecurity experts stand with satisfied looks on their faces with one holding a laptop computer while he group stands in front of a large bank of computers and electronic equipment.
Technology Shares

2 ASX 200 tech stocks Morgans rates as buys

The leading broker has named a couple of shares to buy right now.

Read more »

Man smiling at a laptop because of a rising share price.
Technology Shares

Is it time to buy ASX data centre shares?

ASX data centre shares have been rebounding lately. Will they continue to?

Read more »

a group of people sit around a computer in an office environment.
Earnings Results

Guess which ASX 200 tech stock is rocketing 12% on record results

Another half, another record result from this high-quality company.

Read more »

Man on his laptop standing next to data centres.
AI Stocks

3 reasons to buy this $9 billion ASX 200 AI stock today

A leading expert forecasts this $9 billion ASX 200 AI stock will deliver “meaningful earnings upside”.

Read more »

Business people discussing project on digital tablet.
Technology Shares

After its result, what does Macquarie think Xero shares are worth?

Here's what the leading broker is saying about this tech stock.

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
Technology Shares

Gentrack share price down 5% on half-year results

Let's unpack what was reported.

Read more »