The tech wreck for ASX 200 tech shares appears to be over, with a strong rebound playing out since 31 March.
Investors participated in a major sell-off of ASX 200 tech shares over the seven months to March this year.
Last year, investors were worried about high stock valuations and whether artificial intelligence (AI) capex would pay off.
This year, updates to Anthropic's AI assistant, Claude, inspired fear that AI could destroy software-as-a-service (SaaS) companies.
The S&P/ASX 200 Information Technology Index (ASX: XIJ) nearly halved in value between 29 August and 30 March.
Then came the rebound.
ASX 200 tech shares stormed 13% higher last week, and are up another 0.7% so far this week.
Christopher Watt from Bell Potter says concerns about the impact of AI on SaaS businesses like Xero Ltd (ASX: XRO) are "overblown".
The good news is that presents opportunities to buy the dip.
Today, S&P/ASX 200 Index (ASX: XJO) shares are down 0.26%, with technology among five out of 11 market sectors in the green.
On The Bull this week, two experts gave buy ratings on two ASX 200 tech stocks.
Let's check them out.
Image source: Getty Images
Xero Ltd (ASX: XRO)
The Xero share price is $82.87, up 0.88% today and down 46% over the past 12 months.
Watt explains his buy rating on this ASX 200 tech share:
This accounting software provider remains a high quality business, underpinned by strong subscriber growth and increasing average revenue per user through product expansion.
Xero continues to improve operating leverage as the business scales up globally, with margins expected to expand in response to cost discipline.
Importantly, Xero is transitioning from a growth-at-all-costs model to one focused on profitability and cash generation, which should support a re-rating in valuation.
With a large addressable small-to-medium sized market and increasing penetration of digital accounting, Xero is well positioned to deliver sustained double-digit earnings growth.
We believe concerns related to the impact of artificial intelligence are overblown, and the share price sell-off presents a compelling buying opportunity.
NextDC Ltd (ASX: NXT)
NextDC shares remain in a trading halt at $14.12 apiece due to a $1.5 billion capital raise announced yesterday.
Learn more about the capital raise here.
The capital raise follows a $1 billion wholesale offer of subordinated hybrid securities earlier this month.
The NextDC share price has risen 13% over the past month, and is up 35% over 12 months.
John Athanasiou from Red Leaf Securities gives this ASX 200 tech share a buy rating.
He said:
Australia's leading data centre operator provides connectivity and colocation services to cloud, enterprise and government clients across Australia and the Asia Pacific.
Its network of certified facilities underpin critical digital infrastructure amid surging demand for cloud, artificial intelligence and high performance computing.
NextDC recently launched a $1 billion hybrid securities offer to fund expansion. A strong forward order book reflects institutional confidence in its long term growth.
The company continues to build new facilities and sign strategic partnerships, positioning it to capture structural tailwinds in digital transformation and infrastructure demand.
NextDC shares are expected to resume trading tomorrow.
