What's happening with ASX 200 tech shares following the Nasdaq rout?

Aussie tech investors will be eyeing the big retrace in the Nasdaq overnight.

| 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

S&P/ASX 200 Index (ASX: XJO) tech shares are broadly showing some resilient performance today despite the overnight turmoil in US markets.

In morning trade on Friday, the ASX 200 is down 1.0%.

Here's how these big-name companies in the Aussie tech space are performing at this same time:

  • Shares in cloud-based software solutions provider WiseTech Global Ltd (ASX: WTC) are down 0.1% at $118.11. WiseTech shares are up 103% in 12 months.
  • Accounting software provider Xero Ltd (ASX: XRO) shares are down 1.8% at $146.88. Xero shares are up 37% in 12 months.
  • Shares in data centre operator NextDc Ltd (ASX: NXT) are flat at $16.42. NextDc shares are up 39% in 12 months.

On a broader level, the S&P/ASX All Technology Index (ASX: XTX) – which also contains some smaller companies outside of ASX 200 tech shares – is down 0.8%.

Although outpacing the broader market losses, Aussie tech stocks are catching headwinds today from the rather rough day in US markets overnight.

Here's what's happening.

ASX 200 tech shares hampered by US tech rout

While not immune, ASX 200 tech shares are performing better than I'd expected today following the big retrace in US stock markets overnight.

By the time the smoke cleared, the S&P 500 Index (SP: .INX) was down 1.9%, while the tech-laden Nasdaq Composite Index (NASDAQ: .IXIC) closed the day down a sharp 2.8%.

Among some of the biggest names in the US tech sector, Apple Inc (NASDAQ: AAPL) shares closed down 1.8%, Tesla Inc (NASDAQ: TSLA) shares closed down 3.0%, and Microsoft Corp (NASDAQ: MSFT) ended the day down 6.1%.

It appears investors in the world's top economy were spooked by the same market bugbears that have previously thrown up headwinds for ASX 200 tech shares. Namely inflation and interest rates.

Tech stocks are more sensitive to higher rates. That's because most of these companies are growth-oriented and priced with higher future earnings in mind. And higher interest rates drive up the present cost of investing in those future earnings.

As for what caused selling action in the Nasdaq, yesterday's data from the US Bureau of Economic Analysis showed that underlying – or core – US inflation increased by 0.3% in September and 2.7% year on year.

Core inflation, which, like with the RBA, is the US Federal Reserve's preferred go-to measure for inflation, takes out volatile items like food and energy. And with core inflation running above the Fed's 2.0% target, markets look to have pared back their expectations on the size and pace of future rate cuts from the world's most influential central bank, adding some pressure to ASX 200 tech shares today.

Now, analysts and traders remain relatively certain that the Fed will deliver another 0.25% interest rate cut next week, on 7 November. But the odds of seeing another jumbo-sized 0.50% cut like the one delivered in September are fading.

On the plus side of the equation

Adding weight to the case for additional Fed rate cuts and offering some support for US tech stocks and ASX 200 tech shares alike, consumer spending in the US picked up in September amid ongoing wages growth, while the household savings rate fell markedly.

Commenting on the outlook for further Fed easing, Bloomberg economists Stuart Paul and Estelle Ou said:

The decline in saving helped prop up spending throughout the third quarter. With the Fed's attention rotating more toward the full-employment aspect of its dual mandate, we think the steady annual core inflation measure won't sway the Fed from its rate-cutting path.

Motley Fool contributor Bernd Struben 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 Apple, Microsoft, Tesla, WiseTech Global, and Xero. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has positions in and has recommended WiseTech Global and Xero. The Motley Fool Australia has recommended Apple and Microsoft. 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

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Technology Shares

Guess which ASX 200 tech stock is crashing 14% on results day

This tech stock is having a rough time today. But why?

Read more »

Data Centre Technology
Technology Shares

Is it too late to buy NextDC shares?

NextDC's share price has surged over the last couple of weeks. Will it continue?

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Technology Shares

Guess which ASX 200 tech stock is crashing 25% following an update

This tech stock is being sold off on Wednesday. But why?

Read more »

A young man goes over his finances and investment portfolio at home.
Technology Shares

Why are WiseTech shares sinking 6% today?

What's going on? Let's find out what is happening with this tech stock today.

Read more »

Two IT professionals walk along a wall of mainframes in a data centre discussing various things
AI Stocks

NextDC share price lifts off on record quarterly contract wins

AI-fuelled data centre demand is lifting investor interest in the ASX 200 tech stock today.

Read more »

group of traders cheering at stock market
Technology Shares

What drove a 10% surge in ASX 200 tech shares last week?

The ASX 200 roared to a 2-month high on Friday, with tech shares leading the 11 market sectors last week.

Read more »

A man slumps crankily over his morning coffee as it pours with rain outside.
Technology Shares

Why is the Block share price crashing 33%?

This payment giant's shares are being hammered today. But why?

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Technology Shares

These ASX 200 tech stocks could rise 20% to 35%

Goldman Sachs is tipping these shares to rise strongly from current levels.

Read more »