Australian technology stocks experienced a significant downturn in March, with approximately $7 billion wiped off the sector’s value. Escalating tensions in the Middle East, the looming threat of higher interest rates, and persistent disruption fears stemming from artificial intelligence have all contributed to the market’s woes. A second consecutive interest rate increase from the Reserve Bank of Australia in mid-March further dampened market sentiment, exacerbated by surging inflation expectations fuelled by the conflict in Iran, which has driven up oil prices by over 50 per cent in just four weeks.
The S&P/ASX 200 tech index dropped 12.6 per cent in March, making it the second-worst performing industry group behind mining. Family-tracking app Life360, which provides location-based services, has been particularly hard hit, plummeting 24 per cent in March. Logistics software giant WiseTech Global, which delivers software solutions for the logistics industry, has dropped about 20 per cent in the same month that co-founder Richard White personally negotiated a multimillion-dollar settlement with a female employee who made allegations against him.
Despite the widespread sell-off, some fund managers are cautiously re-entering the market. TechnologyOne, a software company that pays one of the largest dividends, has climbed nearly 3 per cent in March. Wilson Asset Management highlighted TechnologyOne as a potential winner in the tech sector. Seneca Australian small companies fund also shows interest in Objective Corporation, REA Group, and SiteMinder.
The tech sell-off mirrors a similar trend in the United States, where tech stocks have been under pressure amid concerns about the profitability of investments in AI. The escalating war in Iran further eroded risk appetite, pushing the Nasdaq 100 into correction territory, defined as a drop of at least 10 per cent from its recent peak. Amid the market turmoil, fund managers are emphasizing selective stock picking, moving away from chasing growth at any price.
