S&P/ASX 200 Index (ASX: XJO) tech shares are deep into the red during the lunch hour on Thursday.
At the time of writing, the ASX 200 itself is down 2%. The S&P/ASX All Technology Index (ASX: XTX) – which contains some smaller tech shares outside of the ASX 200 – is down 1.7%.
This comes after the US Federal Reserve lifted rates for a fourth consecutive session yesterday. The 0.75% interest rate increase brings the US target rate into the 3.75% to 4% range.
While that increase had been widely priced in by the markets, the hawkish post-announcement press address by Fed chair Jerome Powell was unexpected. And it was clearly unwelcomed by tech investors, with the Nasdaq Composite (NASDAQ: .IXIC) closing down 3.4%.
So, how are the big-name ASX 200 tech shares holding up?
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How are ASX 200 tech shares faring after the Fed's rate hike?
ASX 200 tech shares took Tuesday's rate hike from the RBA in their stride. But they're all losing ground in the face of some further likely rises from the Fed, the world's most watched central bank.
In early afternoon trade, buy now, pay later (BNPL) stock Block Inc (ASX: SQ2), which acquired Afterpay in January, is down 6.5%.
Meanwhile, WiseTech Global Ltd (ASX: WTC), a provider of cloud-based software solutions for the logistics sector, has seen its share price slip by 1.1%.
Accounting software provider Xero Limited (ASX: XRO) is under pressure too, with shares down 2.3%.
And rounding off our list of big-name ASX 200 tech shares, administration services company Link Administration Holdings Ltd (ASX: LNK) is down 1.7%.
What did Powell say to spook investors?
The big sell-off in US tech stocks, and the pressure on ASX 200 tech shares today, really came post the Fed's rate hike announcement.
That's when Powell addressed a media conference, stressing that the Fed was not done with hiking rates yet and that inflation remained stubbornly high.
"We think we have a ways to go before we get to that level of interest rates that we think is sufficiently restrictive," Powell told the conference.
The Fed chair added that the rate hikes had yet to have any material impact on taming inflation.
"The level of rates that we estimated in September, the incoming data suggests that's actually going to be higher. There is no sense that inflation is coming down. We're exactly where we were a year ago," he said.
Companies priced with future earnings in mind are particularly vulnerable to rising rates. That's because as the present cost of holding money goes up, the current value of those future revenue streams goes down.
The reverse will also hold true.
When interest rates finally top out, and eventually begin to head lower, well-placed ASX 200 tech shares should be some of the biggest beneficiaries.
