A bad week on the Nasdaq tends to ripple straight through to ASX tech stocks, but not always in the way the headlines suggest.
The Nasdaq Composite Index (NASDAQ: .IXIC) posted its fifth consecutive losing session on Friday, dropping 0.24% to close at 25,297.62. Investors rotated out of major technology stocks and into more defensive areas of the market.
For the week, the Nasdaq fell 4.6%, its worst weekly performance in months, even as the Dow Jones Industrial Average Index (DJX: .DJI) actually rose 0.6% over the same period.
That rotation also affected ASX stocks, with the S&P/ASX 200 Index (ASX: XJO) falling 0.42%, led by many well-known tech stocks.
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What drove the sell-off, and what this means for ASX tech stocks
A lot of this sell-off can be attributed to renewed caution about the entire AI infrastructure trade.
Chip stocks were weaker after reports that OpenAI is considering delaying its IPO to next year. This is due specifically to Space Exploration Technologies Corp (NASDAQ: SPCX)'s poor performance following its own debut and broader volatility in AI-related shares.
That report raised concerns about the sustainability of AI infrastructure spending, given the delay in funding from the capital markets.
This is a challenge to the thesis behind buying ASX data centre and AI infrastructure stocks this year: that mega-cap AI IPOs would keep validating and funding the buildout.
When the US sneezes, Australia catches a cold. These three ASX tech stocks all reacted in different ways to last week's underperformance.
NextDC Ltd (ASX: NXT)
NextDC is the ASX tech stock most directly exposed to this specific news. This is because OpenAI is the foundational customer for its Western Sydney AI data centre campus.
A delayed OpenAI IPO does not cancel that contracted relationship, but it does remove, at least for now, one of the strongest near-term catalysts that has supported sentiment around NextDC's AI infrastructure thesis.
The contracted capacity and capital expenditure NextDC has already committed to remain unchanged regardless of OpenAI's listing timeline.
But investors should not assume the AI IPO wave will keep providing an automatic tailwind for the stock in the way it has over recent months.
WiseTech Global Ltd (ASX: WTC)
WiseTech is sensitive to broad technology sector rotation given its premium valuation and exposure to global growth-stock sentiment. But this week the company also gave the market its own, separate reason to worry.
Reports emerged that the Australian Federal Police is investigating founder Richard White over serious allegations involving a former employee.
This sent WiseTech shares down almost 13% in a single session, on top of an already difficult year for the stock.
Until there is clarity on both the investigation and the board's response, the stock's near-term moves are likely to reflect that overhang as much as any broader rotation out of growth names.
Xero Ltd (ASX: XRO)
Xero sits closer to the US SaaS peer group than either WiseTech or NextDC. This makes it the most directly comparable of the three to whatever is driving Nasdaq software valuations specifically.
When US growth software names sell off on rate or rotation concerns, Xero's share price tends to move in parallel. This is despite the fact that the company's own performance has remained solid through the volatility.
Xero delivered operating revenue growth of 31% to NZ$2.8 billion in its most recent full-year result. The US stood out as its fastest-growing market on the back of its Melio bill pay integration.
This gives Xero shares a company-specific growth story that has little to do with whatever is driving sentiment on the Nasdaq this week.
Foolish Takeaway for ASX tech stocks
The Nasdaq's worst week in months was driven by a rotation away from growth and AI-adjacent names, sharpened by a specific report that OpenAI may delay its IPO because of SpaceX's shaky debut.
That detail matters more for NextDC than for WiseTech or Xero, given its direct contractual link to OpenAI.
For all three, however, the broader lesson is the same: ASX tech stocks are not immune to what is happening across the pond in the US.
