ASX 200 tech shares closed 1.39% higher on Thursday, mid the S&P/ASX 200 Index (ASX: XJO), hitting a new record high.
Today is a rare bright spot for tech shares after a prolonged rout that has devastated the sector.
The S&P/ASX 200 Information Technology Index (ASX: XIJ) has fallen by more than 40% over the past six months.
By comparison, US tech stocks are still travelling reasonably well, although some big players have seen dramatic recent drops.
The NASDAQ-100 Index (NASDAQ: NDX) is up 6.5% over the past six months, but down 1.4% in the year-to-date (YTD).
Among the index constituents recently smashed are Aussie investor favourite Palantir Technologies Inc. shares, down 24% YTD.
Let's dig deeper.
Image source: Getty Images
What's driving the tech share downturn?
Investors are worried about how the artificial intelligence (AI) revolution will impact various industries and businesses.
Firstly, there's concern about US tech stock valuations after strong earnings growth pushed them higher last year.
Investors are also worried about AI capex commitments.
State Street Investment reports that the Mag 7 is expected to spend up to US$520 billion this year, up 30% from 2025.
The Mag Seven stocks all rose in 2025, but all of them have fallen YTD.
The worst performers are Microsoft Corporation shares, down 17%, and Amazon.com Inc., down 11%.
ASX ETF Global X Fang+ ETF (ASX: FANG), which includes the Mag 7 plus three others, is down 14% YTD.
A recent new concern is whether AI will simply wipe out software-as-a-service (SaaS) companies.
If agentic AI and generative tools can custom-write software, what does that mean for proprietary SaaS products?
We saw this fear play out in early February after Anthropic released a legal software plug-in for its Claude AI model on 30 January.
Since then, the share price of Thomson Reuters Corp, owner of Westlaw and legal research tools, has fallen 24%.
Other NASDAQ 100 SaaS companies have also taken a dive.
Atlassian Corporation Plc shares are down 31%, Workday Inc. stock is down 18%, and Adobe Inc. shares are down 10%.
ASX SaaS shares that have taken a beating over this period include accounting services provider Xero Ltd (ASX: XRO).
The Xero share price has fallen 15% since 30 January and is down 57% over the past 12 months.
Shares in enterprise software provider TechnologyOne Ltd (ASX: TNE) have dipped 4% since 30 January and 22% over the year.
Is there any way to leverage the tech rout for gains?
According to Tony Locantro from Alto Capital, there sure is.
This month, Locantro put a buy rating on Global X Ultra Short Nasdaq 100 Complex ETF (ASX: SNAS).
This ASX ETF allows investors to profit from the tech share rout, but Locantro warns it is best used as a short-term play.
He explains why (courtesy The Bull):
SNAS provides leveraged inverse exposure to the Nasdaq-100, typically rising by about 2 per cent to 2.75 per cent for every 1 per cent fall in the index on a daily basis.
With US technology valuations recently elevated and market leadership increasingly narrow, this ETF offers a tactical hedge against short term weakness in growth equities.
Locantro says the SNAS ETF is designed for short-term positioning and can be affected by compounding if held for extended periods.
However, during heightened volatility or sharp corrections, Locantro says downside moves in the Nasdaq "can translate into meaningful gains".
