Why are ASX tech shares being hit so hard today?

The ASX tech share industry is suffering today, with some of the most well-known names in the red. It is the worst-performing sector on the ASX in early trading, with the S&P/ASX 200 Information Technology (ASX: XIJ) down 2.1%.

Looking at some of the ASX technology stocks with the biggest market capitalisations:

• The WiseTech Global Ltd (ASX: WTC) share price is down 3.75%
• The REA Group Ltd (ASX: REA) share price is down 2.2%
• The Xero Ltd (ASX: XRO) share price is down 2.2%
• The CAR Group Limited (ASX: CAR) share price is down 1.4%  
• The Nextdc Ltd (ASX: NXT) share price is down 3%

What’s causing this indiscriminate selling of ASX tech shares?

The ASX share market’s daily performance is usually heavily influenced by what happens in the global share market, particularly in the US share market.

The US technology sector suffered a sizeable sell-down overnight. Let’s examine what’s going on.

What happened to US technology shares?

In Wednesday trading, the Nvidia share price dropped 6.6%, the Microsoft share price fell 1.3%, the Apple share price dropped 2.5%, the Amazon share price dropped 2.6%, the Tesla share price declined 3.1%, the Meta Platforms share price dropped 5.7%, the Alphabet share price fell 1.6%, and semiconductor business ASML suffered a 10.9% sell-off.

Overall, the NASDAQ-100 Index (NASDAQ: NDX) fell 2.9% overnight.

It has been reported by Bloomberg that the United States is considering implementing significant trade restrictions on tech companies to stop them sending advanced semiconductor technology to China.

With China being one of the biggest economies in the world, restrictions could send shockwaves through the technology sector and supply chain. Additionally, this week, Republican candidate Donald Trump floated the possibility of slapping tariffs on goods from China of between 60% to 100%.

With both Democrats and Republicans seeking to increase pressure on China, it creates more uncertainty for the tech sector and the broader stock market. Time will tell how investors react to ASX tech shares.

Could tech share prices fall further?

The Australian quoted Pepperstone’s head of research, Chris Weston, who was pessimistic about the near term for technology companies:

The world has been debating what could cause big tech and the AI-rated equity names to reverse lower on a sustained basis, and for some time, it’s been hard to make a clear judgment call on when that might be.

Some had talked up valuation as a key concern for the US and global tech plays, with calls that these names had hit peak gross margins, but with such broad-based confidence behind the sustainability of the rally, investors piled in, and positioning had become incredibly rich.       

Well, it appears as though we may have our answer, and it comes from both the Trump and Biden camps, with both presidential candidates beefing up their rhetoric towards the scene and notably towards Taiwan, and companies, most notably ASML, who are providing advanced semiconductors technology to Taiwan.

In my thinking, the rhetoric on protectionist measures offers such limited visibility to efficiently price risk and with limited confidence to price the near-term future it feels like this rich positioning has further to unwind.

Despite one day of negative trading, ASX tech shares and the NASDAQ-100 are still up significantly. To date in 2024, the NASDAQ-100 is up around 20%.

The post Why are ASX tech shares being hit so hard today? appeared first on The Motley Fool Australia.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Tristan Harrison 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 ASML, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, REA Group, 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 ASML, Alphabet, Amazon, Apple, Car Group, Meta Platforms, Microsoft, Nvidia, and REA Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.