Australian shares opened lower on Wednesday after renewed selling in global technology stocks, and a sharp jump in oil prices offset an otherwise resilient performance in New York.
By 10:20 am AEST (12:20 am GMT), the ASX 200 index was trading 1.4% lower at 8,679.9.
The negative tone was set on Wall Street where the Nasdaq Composite Index ended sharply lower, pressured by losses in chipmakers due to mounting doubts about the sustainability of the artificial intelligence (AI)-driven rally.
The Nasdaq dropped 1.2% while the S&P 500 shed 0.5% and the Dow Jones Industrial Average lost 0.3% after briefly hitting a record high earlier in the session on Tuesday (Wednesday AEST).
The chip sell-off marked the latest bout of volatility among memory chipmakers and other AI-related stocks as investors fret that the big stock price increases related to the buildout of AI data centres may have left the shares overvalued.
"The story of today is the story of the last few weeks, and that's rotation after the blistering run in the AI buildout, semis and memory. Expectations have gotten to be almost impossible to beat for these companies," Horizon Investments head of portfolio management Zachary Hill was quoted as saying in a Reuters story.
Escalating geopolitical tensions in the Middle East also played a role in undermining investor sentiment, with oil prices surging after attacks on commercial shipping in the Strait of Hormuz and the United States military response against Iran.
“Obviously energy stocks are going to get a bit of boost today but the tech stocks are likely to struggle,” said CommSec Equity Market Strategist James Gruber.
The Australian market had finished down on Tuesday with the ASX 200 Index dropping 0.3% to 8,803.9 points as seven of the 11 sectors, including materials and energy, ended in the red.
In fixed interest markets, the Australian Government bond yield curve steepened as two-year rates were steady at 4.475% while 10-year rates added 0.73% to 4.838%, at the time of writing.
