This ASX index is up 13% in 2024. Is there more up its sleeve?

The index has also climbed 69.6% since February 2020.

| More on:
two computer geeks sit across from each other with their laptop computers touching as they look confused and confounded by what they are seeing on their screens.

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

The ASX All Technology Index (ASX: XTX) has been a standout performer in 2024. Delivering an impressive 13.4% gain since the start of the year, the index's success highlights the growing strength of Australia's technology sector.

The All Technology Index has been a stellar performer since its launch in February 2020, climbing 69.6% in that period. The index is designed to measure the performance of technology companies listed on the ASX. It includes a broad range of tech-related businesses, including software, hardware, and IT services. 

Key players in the index

The ASX All Technology Index includes a mix of well-established companies and promising newcomers. Some of the most notable companies within the index are:

  • Xero Ltd (ASX: XRO): Cloud-based accounting software company offering intuitive financial management tools
  • REA Group Ltd (ASX: REA): Operates popular property websites like realestate.com.au.
  • WiseTech Global Ltd (ASX: WTC): Provides software solutions to the logistics sector

Factors driving the growth

The COVID-19 pandemic significantly accelerated digital transformation across industries. Companies invested heavily in technology to support remote work, e-commerce, and digital customer engagement. This surge in demand for tech solutions boosted the performance of companies in the sector. 

Increased demand has been reflected in strong earnings reports. Xero reported a 75% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) in FY24, which reached $527 million. REA reported a 24% increase in EBITDA for the 9 months ended 31 March 2024. Likewise, WiseTech Global reported a 23% increase in EBITDA in 1HFY24. 

A supportive regulatory environment in Australia has fostered growth in the tech sector. Government support through grants, tax incentives, and innovation programs has played a crucial role in fostering a conducive environment for tech companies to scale operations. 

Many ASX-listed tech companies, such as Xero and WiseTech Global, have successfully expanded their footprint beyond Australia, tapping into international markets. This global presence has provided them diverse revenue streams and reduced reliance on the domestic market, further strengthening financial performance.

What is the outlook for the ASX All Technology Index? 

As we move through 2024, the outlook for Australian tech stocks remains optimistic, though not without potential challenges. The continued emphasis on digital innovation and the growing importance of technology in everyday life are expected to sustain demand for tech solutions. Companies within the ASX All Technology Index are likely to benefit from ongoing trends such as the rise of artificial intelligence, cybersecurity, and cloud computing.

Nonetheless, several factors could influence the tech sector's performance. Economic conditions, including inflation and interest rates, will play a significant role in shaping the investment landscape. Higher interest rates could impact the valuation of tech stocks as investors reassess the risk-reward profile of growth-oriented companies. 

Keeping a balanced perspective and focusing on long-term growth drivers will assist investors in navigating the Australian tech stock landscape and capitalise on opportunities ahead.

Motley Fool contributor Katherine O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended REA Group, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia has recommended REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Technology Shares

Robot humanoid using artificial intelligence on a laptop.
Technology Shares

The best ASX AI stock to invest $500 in right now

The team at Morgans thinks this is one of the best ways to invest in AI on the ASX.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Technology Shares

This ASX All Ords stock just crashed 25%! Here's why

Let's find out what is making investors rush to the exits on Thursday.

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Technology Shares

What's going on with Xero shares today?

The tech stock has made an announcement this morning relating to its CEO.

Read more »

Three analysts look at tech options on a wall screen
Technology Shares

Why did this small-cap ASX tech stock just explode 39%?

Investors are piling into the ASX tech stock on Wednesday. But why?

Read more »

A woman wearing yellow smiles and drinks coffee while on laptop.
Technology Shares

Investors should put these 2 top ASX tech shares on the watchlist

These tech companies have enormous potential, in my view.

Read more »

A man sits in a chair hunched over a laptop and covered head to toe in frozen icicles to represent Envirosuite's trading halt
Small Cap Shares

ASX small-cap stock halted amid global semiconductor deal

Investors are awaiting details of a capital raise.

Read more »

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

Up 64% in a year, why WiseTech shares are still a buy

Could WiseTech shares deliver another year of benchmark smashing returns in 2025?

Read more »

A man holds his head as he looks at his laptop and contemplates more bills to pay.
Technology Shares

Guess which ASX 200 tech stock just crashed 13% on news from Microsoft?

The tech giant has dealt this company a blow. Let's see what is happening.

Read more »