By Gus McCubbing
It has been another brutal month for investors in Australian technology stocks; about $7 billion was erased from the sector in March as the Middle East conflict and the threat of higher interest rates compounded fears of disruption from artificial intelligence.
A second interest rate rise in as many months from the Reserve Bank of Australia mid-March also did not help market sentiment, nor did surging inflation expectations as the conflict pushed up the oil price more than 50 per cent in just four weeks.
March’s meltdown came hot on the heels of the “SaaSpocalypse” at the start of the year, when investors indiscriminately dumped software-as-a-service companies, worried that artificial intelligence giants such as Anthropic would kill their business models.
“You had the SaaSpocalypse and then went straight into a sharemarket which is off about 7 per cent for the month,” said Atlas Funds Management portfolio manager Hugh Dive.
“If you’re a high price-to-earnings company that is not paying a dividend, there’s no airbag for you in the crash.”
The S&P/ASX 200 tech index dropped 12.6 per cent in March, the second-worst performing industry group behind mining stocks, which were hit by a sell-off in gold and concern that the diesel shortage linked to the war could force miners to suspend production.
Dive said the only real technology winner on the ASX had been software company TechnologyOne, which paid one of the largest dividends and climbed almost 3 per cent in March.
Wilson Asset Management fund manager Tobias Yao tipped TechnologyOne to be the biggest winner in the tech sector.
“Everyone can talk about their AI road map, but the money will gravitate to those that can prove they will benefit in the immediate future,” said Yao.
It was a different story for the rest of the sector.
Family-tracking app Life360, which was a must-own stock for small-cap investors in 2025, suffered the most catastrophic fall, tumbling 24 per cent in March. It is down 44 per cent in the year to date, and has nosedived about 66 per cent from its October record.
Logistics software giant WiseTech also dropped about 20 per cent in March, the month that billionaire co-founder Richard White personally negotiated a multimillion-dollar settlement with a female employee who had made allegations against him.
Mining technology firm Codan lost about 12 per cent in March, while data centre player NextDC dived 18 per cent and increasingly is being targeted by hedge funds betting on further declines.
Short interest as a proportion of total shares owned in NextDC jumped from 6 per cent in January to 9 per cent in March.
Hedge funds swoop
Similarly, hedge funds swooping on Zip earned a handsome reward in March as the payments company’s shares lost about 19 per cent.
Short activity in Zip doubled from 4.2 per cent of total shares owned in early February to more than 9 per cent in March.
This trend also played out in the United States, where technology stocks were pummelled since peaking in October amid growing concern about whether hefty spending on AI would pay off.
The escalating war in Iran further dented risk appetite, sending the Nasdaq 100 into a correction at the end of last week, marked by a drop of at least 10 per cent from its recent peak.
Among the magnificent seven tech giants, most, including Amazon, Alphabet and Facebook owner Meta, are either at or skirting near a bear market.
Software companies such as Mike Cannon-Brookes’ Atlassian have also been slammed, with the shares falling almost 10 per cent in March, to be down more than 40 per cent since late October.
Memory chip companies, including US-based Micron, and South Korean heavyweights Samsung and SK Hynix, are also nursing huge losses, not helped by Google research on a new algorithm, known as TurboQuant, which could cut the amount of memory required to run large language models.
“That spooked investors,” said Minotaur Capital founder Thomas Rice.
“The sell-off in tech has multiple drivers layered on top of each other – Iran conflict driving energy costs higher, tariff threats on Korean memory makers, and some ‘sell the news’ after Micron’s blowout earnings,” said Rice.
“But fundamentally, memory supply is still tight and sold out through 2026 under binding contracts.”
Amid the brutal sell-down, some fund managers, including Ben Richards, co-portfolio manager of Seneca Australian small companies fund, have dipped their toes back into the market.
Richards liked software group Objective Corporation and real estate listings platform REA Group, which plunged this year over concerns of AI-rendered obsolescence, as well as hotel booking platform SiteMinder.
“Investors have been caught out paying for ‘growth at any price’,” said Richards.
“This is where selective stock picking starts to matter again, not just chasing momentum.”
Licensed by Copyright Agency. You must not copy this work without permission.
