Why are ASX 200 tech stocks like Xero shares taking a beating on Monday?

S&P/ASX 200 Index (ASX: XJO) tech stocks are under pressure today.

In late morning trade on Monday, the S&P/ASX All Technology Index (ASX: XTX) – which also contains some smaller technology-focused companies outside of ASX 200 tech stocks – is down 0.8%.

Here’s how five of the biggest ASX tech companies are performing at this same time:

• Shares in cloud-based software solutions provider WiseTech Global Ltd (ASX: WTC) are down 1.2% at $70.15
• Shares in software-as-a-service provider Technology One Ltd (ASX: TNE) are down 0.6% at $27.04
• Shares in data centre operator NextDc Ltd (ASX: NXT) are down 2.5% at $13.17
• Shares in location-sharing software developer Life360 Inc (ASX: 360) are down 0.8% at $34.54
• Shares in accounting software provider Xero Ltd (ASX: XRO) are down 1.1% at $111.60

Why are ASX 200 tech stocks losing ground today?

Today’s sell-down has nothing to do with new company-specific negative developments from the above-mentioned stocks.

Instead, ASX 200 tech stocks are following the lead of the major United States-based tech shares lower, with the Nasdaq Composite Index (NASDAQ: .IXIC) closing down 1.7% on Friday.

The tech sector hit some turbulence amid rising investor concerns that AI-related stocks may have seen too much money flowing in too quickly. Amid the massive costs involved in developing ever-evolving AI technology, along with the data centres to support it, questions remain over the potential revenue on offer at the end of the road.

Shares in generative AI chip-making giant Nvidia Corp (NASDAQ: NVDA) fell 3.3% on Friday and are now down 15.5% from the 29 October all-time closing high.

And following last Thursday’s 10.8% drop after revealing increasing AI expenditures, shares in cloud computing software giant Oracle Corp (NYSE: ORCL) are now down 42.1% since posting its own record closing high on 22 September.

What the experts are saying

Commenting on the AI-linked tech sell-off that’s impacting ASX 200 tech stocks today, Jim Morrow, CEO of Callodine Capital Management, said (quoted by Bloomberg), “We’re in the phase of the cycle where the rubber meets the road. It’s been a good story, but we’re sort of anteing up at this point to see whether the returns on investment are going to be good.”

Eric Clark, portfolio manager at the Rational Dynamic Brands Fund, added:

If you think about how much money, it’s in the trillions now, is crowded into a small group of themes and names, when there’s the first hint of that theme even having short-term issues or just valuations get so stretched they can’t possibly continue to grow like that, they’re all leaving at once.

Louis Navellier, CEO at Navellier & Associates, noted that after the strong run to new recent record highs, some profit taking is to be expected (quoted by The Australian Financial Review).

“The AI bubble is deflating but not popping,” he said.

ASX 200 tech stocks have materially underperformed their US counterparts in 2025.

Year to date, the Nasdaq remains up 20.1% while the ASX All Tech Index is now down 10.6% this year.

The post Why are ASX 200 tech stocks like Xero shares taking a beating on Monday? appeared first on The Motley Fool Australia.

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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 Life360, Nvidia, Oracle, Technology One, WiseTech Global, and Xero. The Motley Fool Australia has positions in and has recommended Life360, WiseTech Global, and Xero. The Motley Fool Australia has recommended Nvidia and Technology One. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.