ASX drops 1.9 per cent in $60 billion sell-off as tech stocks dive on AI worries

Investors wiped more than $60 billion off the Australian sharemarket on Tuesday as the ASX posted its biggest fall since Donald Trump’s Liberation Day tariffs announcement in April, amid global fears that share prices have run ahead of themselves in the frenzy around artificial intelligence.

The S&P/ASX 200 slumped 167.30 points, or 1.9 per cent, to 8469.10, hitting a five-month low as the tech sector dived 6.2 per cent and the heavyweight miners and banks, which make up more than half of the local bourse, suffered heavy lessons. The Australian dollar was down 0.2 per cent at US64.85¢ at 4.44pm AEDT. In the sea of red, James Hardie shares rallied after a profit upgrade.

Compounding the AI gloom, the Reserve Bank’s minutes of its Melbourne Cup Day meeting cemented forecasts that the central bank will keep interest rates on hold until at least May. CBA boss Matt Comyn told a parliamentary hearing in Canberra the nation’s biggest lender expects the cash rate will “more likely than not” remain unchanged all through 2026 because inflation was too high.

Technology shares were leading the sell-off, and closed sharply lower after AI giant Nvidia and other tech superstars slumped on Wall Street overnight.

Software makers WiseTech Global and Xero were down 4.6 per cent and 3.3 per cent, respectively. AI data centre operator NextDC fell 5 per cent. Services business software maker TechnologyOne plummeted 17.2 per cent even after reporting a 17 per cent rise in full-year profit, raising its full-year dividend by 15 per cent and declaring a special dividend of 10¢ a share, as investors had banked on stronger growth and missed a profit outlook.

The market’s two biggest sectors, banks and materials, were the second and third-biggest losers in Tuesday’s session. All big four banks finished lower, with CBA – the nation’s biggest stock – down 1.7 per cent. Westpac lost 3 per cent, National Australia Bank shed 2.1 per cent and ANZ Bank wiped out a small gain to trade down 0.9 per cent. “Millionaires Factory” Macquarie lost 1.7 per cent.

The nation’s top miners – iron ore giants BHP, Rio Tinto and Fortescue – were down 3.7 per cent, 2.7 per cent and 2 per cent, respectively. Rio said it will almost halve production at its Yarwun Alumina refinery as waste stockpile reaches capacity and the company seeks to cut cost while exploring ways extend the plant’s life.

Gold miners Northern Star (down 5.6 per cent), Evolution Mining (down 5.2 per cent) and Newmont (down 2.7 per cent) were also lower after gold prices declined for a fourth straight day, hurt by fading expectations for another US interest-rate reduction next month.

BlueScope Steel fell 1.7 per cent after telling shareholders at its AGM it expects first-half earnings to come in at the bottom end of its forecast of $550 million to $620 million, due to escalating costs and softer steel prices.

On the bright side, lithium miners gained after one of China’s major suppliers delivered a bullish forecast for the battery material that had been languishing in a global glut. Ganfeng Lithium Group Chairman Li Liangbin was quoted as predicting 30 per cent demand growth next year. Shares in Pilbara Minerals climbed 3.3 per cent and Liontown Resources gained 2.1 per cent.

James Hardie defied the market rout and rallied 9.9 per cent after the embattled building materials maker raised its full-year profit forecast, citing steadying demand for home sidings and trims, just months after the company doubled down on US housing by buying home-decking provider Azek. The deal, struck without shareholder approval, had sparked a massive sell-off in James Hardie’s shares and led investors to oust chair Anne Lloyd last month. In a separate filing, the company said it appointed independent non-executive board member Nigel Stein as its new chair.

On Wall Street overnight, the S&P 500 fell 0.9 per cent and pulled further from its all-time high set late last month, ending a 10-week streak of winning Mondays. The Dow Jones dropped 557 points, or 1.2 per cent, and the Nasdaq composite sank 0.8 per cent.

Nvidia was the heaviest weight on the US market, as it’s often been in its last couple of tumultuous weeks. The chip company fell 1.8 per cent, while losses for other AI winners included a 6.4 per cent slide for Super Micro Computer.

Other areas of the market that had been high-momentum winners also sank. Bitcoin fell below $US92,000 overnight, down from nearly $US125,000 last month, for example. That helped drag down Coinbase Global by 7.1 per cent and Robinhood Markets by 5.3 per cent.

Critics have been warning that markets could be primed for a drop because of how high prices have shot since April, leaving them looking too expensive. Critics point in particular to stocks swept up in the AI mania, which have been surging at spectacular speeds for years. Even with Monday’s loss, Nvidia is still up 39 per cent for the year so far after it doubled in price in four of the last five years.

That has Wall Street’s spotlight on Wednesday [Thursday morning AEDT], when Nvidia will report how much profit it made in its latest quarter. AI stocks have surged as much as they have because of expectations that they’ll produce huge growth in profits. If they fail to top analysts’ expectations, that would undercut one of the big assumptions that’s driven the US stock market to records.

Such high expectations extend beyond tech stocks, even if they are toughest for AI darlings.

That helped offset a rise of 3.1 per cent for Alphabet. It jumped after Berkshire Hathaway said it built a $US4.9 billion ownership stake in Google’s parent company. Berkshire Hathaway, run by famed investor Warren Buffett, is notorious for trying to buy stocks only when they look like good values while avoiding anything that looks too expensive.

Another source of potential disappointment for Wall Street is what the Federal Reserve does with interest rates. The expectation had been that the Fed would keep cutting interest rates in hopes of shoring up the slowing job market. Wall Street loves lower rates because they can give a boost to the economy and to prices for investments.

But questions are rising about whether a third cut for the year will come out of the Fed’s next meeting in December, something that traders had earlier seen as very likely. The downside of lower interest rates is that they can make inflation worse, and inflation has stubbornly remained above the Fed’s 2 per cent target.

Fed officials have also pointed to the US government’s shutdown, which delayed the release of updates on the job market and other signals about the economy. With less information and less certainty about how things are going, some Fed officials have suggested it may be better to wait in December to get more clarity.

Now that the shutdown is over, the government is preparing to release September’s delayed jobs report on Thursday.

with AP, Bloomberg

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