S&P/ASX 200 Index (ASX: XJO) tech shares are feeling the pain today following the overnight Nasdaq Composite Index (INDEXNASDAQ: .IXIC) crash.
The tech-heavy US stock market index came under heavy selling pressure right from the opening bell and ended the day down a precipitous 3.6%.
In early afternoon trade in Australia on Thursday, the US stock market sell-off sees the ASX 200 down 1.0%.
And tech stocks are bearing the brunt of the pressure. The S&P/ASX All Technology Index (ASX: XTX) – which also contains some smaller companies outside of ASX 200 tech shares – is down 2.0% at this same time.
As you'd expect, the Betashares NASDAQ 100 ETF (ASX: NDQ), intended to track the Nasdaq-100 (INDEXNASDAQ: NDX), is also having a day to forget, down 1.9%. However, it's worth noting that NDQ remains up 25% since this time last year.
As for some of the top ASX 200 tech shares, the WiseTech Global Ltd (ASX: WTC) share price is down 3.4%; accounting software provider Xero Ltd (ASX: XRO) shares are 3.5% lower; and shares in data centre operator NextDC Ltd (ASX: NXT) have fallen 2.7%.
Nasdaq plunge drags ASX 200 tech shares down
The big overnight fall in the Nasdaq that's pressuring ASX 200 tech shares today comes after two of the world's biggest tech companies reported their earnings results.
Investors also appear to be getting jittery about just how long it may take for the billions of dollars these companies are investing in artificial intelligence to begin paying off.
As for the earnings results, shares in Alphabet Inc Class A (NASDAQ: GOOGL), or Google if you prefer, closed down 5% yesterday following its earnings announcement.
Despite reporting strong financial results, eToro market analyst Farhan Badami said, "Alphabet faced a setback in its strategic expansion plans. The company's bid to acquire the cybersecurity firm Wiz for $23 billion was declined."
Badami added:
The failed acquisition attempt also reflects broader challenges in the regulatory environment for big tech companies. With increasing scrutiny from regulators, large-scale mergers and acquisitions face significant hurdles.
Elon Musk's global EV company Tesla Inc (NASDAQ: TSLA) also released its earnings results. Those results sent the share price plunging 12.3%, and they're certainly not doing any favours for ASX 200 tech shares today.
"Tesla missed earnings estimates for the fourth quarter in a row, extending its tumultuous 2024," Josh Gilbert, market analyst at eToro said.
"Most other key metrics missed estimates, but revenue did jump to $25.5 billion, above the $24.6 billion expected," Gilbert added. "One of the biggest disappointments is the view of 'notably lower' vehicle sales in 2024."
Delays flagged for Musk's highly anticipated Robotaxi project also had investors favouring their sell buttons.
What are the experts saying?
Commenting on the Nasdaq crash and the resulting pressure on ASX 200 tech shares today, ANZ Group Holdings Ltd (ASX: ANZ) said, "Equity markets sold off, weighed down by disappointing earnings, particularly amongst tech companies who have invested heavily in AI but are yet to reap any results."
Capital Economics' John Higgins said (quoted by The Australian Financial Review), "There is a widely held view that some 'big tech' firms were 'priced for perfection' coming into this earnings season."
As such, he said the overnight retrace in the Nasdaq was "not surprising".
According to Alec Young, chief investment strategist at Mapsignals:
The overarching concern is, where is the ROI [return on investment] on all the AI infrastructure spending? There's a pretty insane amount of money being spent. Maybe it'll pay off in a few years.
But I think investors realise that the payoff is going to take time to materialise and the hyper-scalers' earnings are being hurt in the short term by how much they're spending on it.
Neville Javeri, portfolio manager at Allspring Global Investments, remains optimistic about the big tech companies over the longer term.
"In the short run, there may be a little AI fatigue, just because some of these investments that the Big Tech companies have made in AI may not be paying off in the time period that investors had in mind," Javeri said (quoted by the AFR).
Munro Partners chief investment officer Nick Griffin agrees:
Over the last quarter, we continued to pick up more data points suggesting that the market is underestimating the long-term potential for earnings growth for the AI enablers. We maintain conviction in this area and see it as the beginning of a multi-year growth runway.
How have these ASX 200 tech shares performed longer term?
Despite today's selling pressure, the Xero share price remains up 16% year to date.
WiseTech shares have performed even better, up 21% so far in 2024.
And ASX 200 tech share NextDC also sees its share price up 21% this calendar year.
