ASX Wobbles as US Tech Sell-Off Spills Over: US Markets Hit by Valuation Jitters, Analysts Urge Caution

Key Highlights:

• ASX drifts lower as global risk sentiment weakens following sharp US tech sell-off.
• Nasdaq drops 2% overnight amid valuation concerns and disappointing tech guidance.
• Japan’s Nikkei and South Korea’s KOSPI see steep declines, amplifying regional weakness.
• Analysts cite stretched valuations and fading hopes of rate cuts as triggers.
  
   

The Australian share market turned lower on Wednesday, mirroring the global risk-off mood after Wall Street’s tech-heavy Nasdaq tumbled 2% overnight. The sell-off, driven by valuation worries and underwhelming guidance from major technology firms, rippled across Asia, pulling Japan’s Nikkei down 4.7% and dragging the ASX 200 to near a six-week low.

By mid-afternoon, the S&P/ASX 200 was down 0.23% to 8,793 points, while the All Ordinaries shed 0.41%. The All Technology Index slumped 1.82%, extending a two-day decline as local tech names mirrored the weakness in their US counterparts.

The downturn followed a night of steep losses on Wall Street, where investors sold off high-growth technology stocks amid fears the market had overextended itself after months of AI-driven enthusiasm. The Nasdaq fell 2.04%, the S&P 500 dropped 1.17%, and the Dow Jones slipped 0.53%.

Global Market Pulse

Across Asia, the fallout was swift. Japan’s Nikkei 225 and South Korea’s KOSPI both suffered heavy losses, triggering trading halts on the futures exchange in Seoul. “Retail investors and hedge funds have been extremely exposed on the long side to technology stocks globally,” said Jon Withaar, senior portfolio manager at Pictet Asset Management in Singapore. “A combination of cautious comments from major US bank CEOs and the violent downward move in crypto has damaged sentiment.”

Bitcoin also dipped below US$100,000 for the first time since June before rebounding slightly. The drop came as risk appetite faded, with analysts warning that macro headwinds — including the prospect of fewer rate cuts from the US Federal Reserve — are driving investors to unwind leveraged positions across speculative assets.

Tech Valuations Under Pressure

The latest sell-off was triggered by weak investor reaction to AMD’s fourth-quarter guidance, which, while above Wall Street expectations, failed to justify lofty valuations built on AI optimism. Shares of AMD fell more than 3%, sparking a broader rotation out of megacap tech names, including Nvidia, Apple, and Amazon.

Analysts say this could be the start of a needed correction in the overheated tech sector. “Markets had priced perfection into AI and semiconductor valuations,” said Art Hogan, Chief Market Strategist at B. Riley Wealth. “Any sign of slowing earnings momentum or muted guidance is enough to send investors heading for the exits.”

Adding to the unease, both Goldman Sachs and Morgan Stanley executives publicly questioned whether equity valuations — particularly in technology — could be sustained given slowing revenue growth and tighter liquidity.

ASX: Local Sectors Feel the Chill

At home, miners and technology stocks led declines, while defensive sectors like utilities and financials provided modest support. The materials index fell 1.43%, dragged lower by a 3.8% fall in Fortescue, a 2.8% dip in Rio Tinto, and a 1.3% slide in BHP, following a further 1.5% drop in iron ore prices.

China’s persistent manufacturing slowdown, coupled with renewed tariff uncertainty, weighed on demand expectations. Dalian iron ore futures fell for a fourth consecutive session, while the Shanghai Composite lost 0.5% amid weakening industrial activity.

Meanwhile, the All Technology Index mirrored Nasdaq’s decline, falling nearly 2% as investors rotated into cash and defensive sectors. Local heavyweights such as WiseTech Global, Xero, and NextDC all traded lower.

Offsetting some of the pressure, banking stocks gained ground, with the ASX 200 Banks Index up 0.82%, led by Commonwealth Bank (+1.45%) and ANZ (+1.2%). Analysts at Morgans noted that the financial sector remains “well positioned” amid steady rate settings and stronger-than-expected earnings resilience.

Analysts Urge Perspective

Market strategists say the sell-off, while sharp, may represent a healthy recalibration rather than the start of a broader downturn. “What we are seeing is a rebalancing of overextended positions,” said Tony Sycamore, market analyst at IG Australia. “Investors had piled into high-growth names at any price. Now, with interest rate expectations stabilising and bond yields ticking higher, there’s a reassessment of fair value.”

Sycamore added that the ongoing correction in cryptocurrencies has intensified the pullback in risk assets. “Crypto’s decoupling from equity rallies, coupled with a strong US dollar, suggests traders are becoming more selective — preferring fundamentals over narratives,” he said.

Broader Sentiment: Rate Uncertainty and Inflation Fears

Adding to global unease, the US Federal Reserve’s latest data showed banks tapping a Fed funding facility at record levels, sparking fresh concerns about liquidity and the health of the financial system. Domestically, the Reserve Bank of Australia’s decision to hold interest rates steady this week, while flagging ongoing inflation risks, reinforced expectations that monetary easing remains some way off.

“The RBA has made it clear that inflation remains too high for comfort,” said Su-Lin Ong, Chief Economist at RBC Capital Markets. “Markets are now pricing in a longer plateau before rate cuts begin, which will likely keep equity volatility elevated through the summer.”

Commodities and Currencies

Commodity markets offered little relief. Brent crude edged down to US$64.42 per barrel, while gold rose 0.73% to US$3,960 per ounce as investors sought safety. The Australian dollar traded slightly weaker at US64.81¢, reflecting softer risk appetite and stronger demand for the greenback.

In contrast, copper prices gained 0.93%, supported by short-term buying as traders looked for opportunities amid the broader correction.

Outlook

Analysts expect the ASX to remain range-bound in the coming sessions as investors digest corporate earnings, central bank commentary, and global risk signals. “We’re seeing a classic ‘risk-off’ repricing phase,” said Shane Oliver, Chief Economist at AMP Capital. “It’s too early to call a bear market, but a period of consolidation or mild correction across tech-heavy indices wouldn’t surprise anyone.”

For now, traders are keeping a close eye on Friday’s US employment report and any fresh Fed commentary that could hint at shifts in rate-cut expectations.