Ugh — it's been another shocker for ASX 200 tech shares this week.
The S&P/ASX 200 Information Technology Index (ASX: XIJ) is currently 13.07% down over the past five days of trading.
And that's no anomaly.
The new year has basically been a bin fire for ASX 200 tech stocks so far.
Check out this year-to-date (YTD) performance for the 11 ASX 200 market sectors.
| S&P/ASX 200 market sector | YTD performance |
| Energy (ASX: XEJ) | 7.1% |
| Materials (ASX: XMJ) | 5.2% |
| Consumer Staples (ASX: XSJ) | 2.4% |
| Healthcare (ASX: XHJ) | 0.3% |
| Financials (ASX: XFJ) | 0.1% |
| Consumer Discretionary (ASX: XDJ) | (1.9%) |
| Industrials (ASX: XNJ) | (2.6%) |
| Utilities (ASX: XUJ) | (3.2%) |
| Communications (ASX: XTJ) | (5.7%) |
| A-REIT (ASX: XPJ) | (5.8%) |
| Information Technology (ASX: XIJ) | (20.5%) |
Oh, the pain for those of us invested in tech stocks!
Meantime, the benchmark S&P/ASX 200 Index (ASX: XJO) has increased by 0.2% YTD.
So, why are ASX 200 tech shares in the trash?
Let's review.
Image source: Getty Images
Why are ASX 200 tech shares in the trash?
Tech company valuations have been a concern for a while, particularly in the US, following another strong year for the sector in 2025.
A small group of large US-listed companies, including the Mag Seven, has driven extraordinary gains for the US market for a few years.
Now, investors are worried about the incredible volume of money that these companies are ploughing into artificial intelligence (AI), and whether the pay-off will be worth it.
In its Global Market Outlook for 2026, State Street Investment says:
… the US remains the epicenter of the AI trade with Magnificent 7 share price gains fueled by AI spending expectations.
Capital spending by this cohort is expected to grow to about $520 billion in 2026, or over 30% year-on-year.
This week, the Nasdaq Composite Index (NASDAQ: .IXIC) fell to its lowest point since November after Google parent company, Alphabet Inc, said it may spend as much as $US185 billion in capex this year.
Bank of America forecasts that overall AI capex will quadruple to $1.2 trillion by 2030.
Investors are also worried that AI itself will end up being a competitor to tech companies, especially software-as-a-service (SaaS) firms, if it can deliver similar services in the future.
Everything that happens in the US tech sector affects ASX 200 tech shares, as our market tends to follow the US every day.
In terms of local factors dragging ASX 200 tech shares down, an interest rate hike in Australia this week did no favours for the sector.
Additionally, some of the big players in ASX technology have come under share price pressure due to valuation concerns this year.
There have also been governance issues with the sector's largest company, WiseTech Global Ltd (ASX: WTC).
On top of all that, mining shares have become the hottest trade in town, and this has diverted investors' attention away from tech.
Impact on ASX 200 tech shares
Here is a sample of ASX 200 tech shares and how they are travelling in the YTD.
The WiseTech share price is $46.76, down 6.3% today and down 32% YTD.
The Xero Ltd (ASX: XRO) share price is $79.65, down 3% on Friday and down 29% YTD.
TechnologyOne Ltd (ASX: TNE) shares are $21.89 apiece, down 4.9% today and down 21% YTD.
Nextdc Ltd (ASX: NXT) shares are $12.43, down 6% today and down 0.9% YTD.
Megaport Ltd (ASX: MP1) shares are $9.97, down 8.8% today and down 19% YTD.
