New AI Nerves Cause Stock Markets to Fall

This triggered another heavy sell-off in technology stocks and dragged the broader index lower. The S&P/ASX 200 fell 1.39 per cent, and only two sectors finished the session in positive territory. Despite the setback, the benchmark index remains modestly higher over the past month.

Technology tumbled more than 5 per cent for the day, extending losses for 2026 to nearly a quarter of their value. Investor unease has been building around global spending on artificial intelligence infrastructure, a theme that has unsettled US markets and now appears to be weighing heavily on Australian counterparts.

Major names in the sector were hit hard. WiseTech Global dropped more than 10 per cent, while Xero declined 4.5 per cent. Although some analysts maintain that certain large-cap technology firms possess defensive characteristics that could cushion them from shifting AI sentiment, the broader market mood was clearly risk-averse.

The sell-off was not confined to technology. Losses spilt into logistics and commercial property, suggesting a wider reduction in risk exposure ahead of key US inflation data. Currency markets reflected the shift in sentiment, with the Australian dollar easing back toward 71 US cents as traders reassessed global growth expectations and the outlook for US monetary policy.

Commonwealth Bank analysts warned that the AI narrative could have deeper implications for Australia’s market positioning. As global investors refocus on US technological dominance, Australia risks being viewed once again as an economy heavily reliant on traditional sectors such as mining and agriculture. While the Australian dollar has gained around 6 per cent against the greenback since the start of the year, strategists caution that any near-term strength may prove temporary if capital continues to favour US assets.

The banking sector initially showed strength, but early gains faded as investors locked in profits. Westpac briefly reached a record high following its quarterly update before finishing lower. ANZ stood out as the only major bank to post gains, helped by a broker upgrade.

Elsewhere, corporate updates drove sharp moves. Shipbuilder Austal plunged after revealing an accounting mistake that overstated earnings guidance. Travel company Webjet also suffered a steep fall after takeover discussions failed and profit expectations were revised down.

Gold prices recovered slightly after overnight volatility, but local gold producers still closed lower, reflecting lingering market uncertainty and cautious investor sentiment.