Source: Bloomberg. Since common inception 21 March 2014 to 16 March 2026. Chart is displaying total return indices. You cannot invest directly in an index. Past performance is not an indicator of future performance.

Since S&P’s launch of the S&P/ASX All Technology Index (the Index) in February 2020, investors have had a true benchmark for Australia’s technology sector, enabling analysis of both individual companies and the sector as a whole.

Amid a 35%+ drawdown from its latest peak [2] and as market uncertainty intensifies, Betashares unpacks the makeup of, and return drivers behind, the Australian tech sector and discusses the opportunities and risks ahead for investors.
 

Australian technology is no stranger to selloffs

While a drawdown of 35% might seem like a dramatic statistic for more 'traditional' sectors, it is not necessarily an anomaly for Australian technology. 

For example, over the period from March 2014 to March 2026, the sector experienced six drawdowns of 20% or more, with three drawdowns greater than 35% since 2020, Betashares analysis shows. 

Despite these historical pullbacks, over the longer term since March 2014, the sector has returned 10.1% p.a. [3] (noting the current drawdown's impact on this figure).

Australia’s listed tech sector has historically rebounded in the years following these significant sell-off troughs (remembering of course that past performance isn't indicative of future performance).

Source: Bloomberg. Since index inception 21 March 2014. Covid drawdown: 18 February 2020 to 2 July 2020. Growth scare drawdown: 19 November 2021 to 17 July 2024. Current drawdown: 6 October 2025 to 16 March 2026 (not yet recovered). You cannot invest directly in an index. Past performance is not an indicator of future performance.

Being a high-beta sector (meaning share prices tend to move more than overall market, up or down), Australia’s listed tech sector has historically experienced larger drawdowns than the broader market during growth scares, such as the March 2020 selloff due to the Coronavirus outbreak.

Additionally, the Australian tech sector is sensitive to interest rate expectations. Some tech companies attract high valuations due to strong earnings growth expectations and future upside potential.

For instance, markets pricing in higher future interest rates played a big role in both the 2022 selloff in listed tech stocks and in the current drawdown [4].

There is, however, a factor unique to the current selloff. In Betashares’ opinion, the threat from artificial intelligence (AI) to software has made the Australian tech sector particularly vulnerable and has seen its performance diverge from other regions, like the Nasdaq 100 index in the United States.
 

Australian technology universe

While traditional sector classifications like the Global Industry Classification Standard (GICS) identify the information technology (IT) sector, this does not guarantee that all tech companies in a market are captured within it.

In Australia for instance, Pro Medicus (ASX:PME) (a leading healthcare imaging software company) and Car Group (ASX:CAR) (an online automotive marketplace) are not classified in the IT sector, instead identified as healthcare and communication services companies respectively.

This is why S&P’s creation of the S&P/ASX All Technology Index was so important. The Index goes beyond the IT sector classification by including GICS sub-industries across sectors to capture the breadth of Australian technology companies, including:

• consumer electronics (consumer discretionary),
• health care technology (healthcare), and
• transaction and payment processing services (financials).

The result is a comprehensive portfolio of technology companies across Australia’s market. 

Of the Index's 47 holdings, 31 tech companies appear in the ASX 300 yet collectively represent just 4% of that index [5]. The remaining 16 sit outside the 300 largest Australian companies entirely, meaning investors in broad market funds likely have little to no exposure to them.
 

Unpacking Australia’s technology sector

Examining the Australian technology sector’s composition helps to explain the current selloff.

79% of the Index’s holdings are software companies, with just 17% classified as hardware. Of the software companies, 69% operate business to business (B2B) models [6]. 

Compare this to the Nasdaq 100, with only 37% of current holdings classified as software companies and 42% hardware. The Nasdaq also has an almost even split of B2B versus business to consumer (B2C) models [7].

Source: Betashares, Bloomberg. As at 13 March 2026. Sub-type and customer type as identified by Betashares by index weight.

Current concerns around AI disruption are being directed at B2B software companies as investors face uncertainty around their future profitability. The rapid advancement of AI capabilities is seen as a core threat to existing software moats that could be breached by cheaply created and implemented alternatives. 

Additionally, B2B software companies relying on seat-count subscription models (where firms pay a licence fee per user) may face the threat of job reducing licence volumes across core business functions like finance (Xero, ASX:XRO) and HR/recruitment (SEEK, ASX:SEK). 

Technology hardware companies, as the picks and shovels of AI infrastructure, have largely been spared this pressure.
 

Conclusion

In Betashares’ opinion, current investor uncertainty toward tech stocks is not misplaced. Disruption risk is a permanent feature of technology investing. 

But disruption also presents potential opportunities for tech incumbents to integrate and adapt and new entrants to grow. 

In a sector as dynamic and small as Australian technology, this points to the potential benefits of an indexed ETF approach.

Rather than concentrating risk in individual tech names, index ETFs can provide exposure to a broad basket of companies across a sector. 

As leading companies or new disruptors grow, their weight within an index increases naturally and investors gain greater exposure to emerging winners over time while reducing exposure to those that do not adapt.

For example, the Betashares S&P/ASX Australian Technology ETF (ASX:ATEC) is one example of a product designed to track the S&P/ASX All Technology Index. This reference is provided for informational purposes only and does not constitute a recommendation.

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[1] Source: Bloomberg. As at 16 March 2026. Weight of S&P/ASX All Technology Index constituents in the S&P/ASX 300.
[2] Source: Bloomberg. As at 16 March 2026.
[3] Source: Bloomberg. 21 March 2014 to 27 February 2026. Past performance is not an indicator of future performance. You cannot invest directly in an index.
[4] Source: Bloomberg, Betashares. Analysis of relationship between Australian 10-year government bond yields and S&P/ASX All Technology Index performance during historical episodes. Past performance is not an indicator of future performance.
[5] Source: Bloomberg. As at 16 March 2026. Weight of S&P/ASX All Technology Index constituents in the S&P/ASX 300.
[6] Source: Betashares, Bloomberg. As at 13 March 2026. Sub-Type and Customer Type as identified by Betashares by index weight.
[7] Source: Betashares, Bloomberg. As at 13 March 2026. Sub-Type and Customer Type as identified by Betashares by index weight.