BHP’s record high caps one of ASX’s wildest days in history

An unremarkable 0.8 per cent rise for the S&P/ASX 200 hid one of the most violent rotations out of technology businesses and into mining giants in the local share market’s history on Wedneday.

Over the trading day, the market’s most valuable business, BHP, soared 4.5 per cent for its biggest one-day move since July and led a posse of iron ore, copper, lithium, coal and gold miners higher.

The buying pushed the S&P/ASX 200 Materials sector 3.5 per cent higher, while the S&P/ASX 200 Technology Sector cratered 9.4 per cent on frenzied selling linked to worries over artificial intelligence as it headed for its seventh straight months of losses.

“We think global inflation expectations have room to rise as we’re in an accelerating world growth environment, if you’re in that environment typically investors want inflation hedges and resources stocks fit that bill,” said Damien Boey a portfolio strategist at Wilson Asset Management. “And if you look at history whenever you see interest rates rise across the bond market’s yield curve resources stocks tend to rise as they’re considered inflation protection names.”

On the other side of the ledger there was a historic bloodbath for technology and more specifically software stocks. The sector formerly celebrated as a market darling by fund managers was dumped on worries that AI services will lower the growth rates of software businesses or even send them bankrupt.

Tech’s Black Wednesday

Over the trading session, cloud accounting giant cratered nearly Xero 16 per cent lower. While logistics software group WiseTech crashed nearly 11 per cent and investment platform Hub24 tumbled 10.8 per cent.

Digital classifieds giants Carsales and REA Group lost more than 7 per cent each, with jobs portal SEEK losing 8 per cent. On Wall Street homegrown software giant lost 7 per cent overnight and has now bombed 66 per cent in 12 months amid panic selling.

“For the growth [tech] investor a dollar tomorrow is worth a lot as they don’t give you earnings today,” said Mr Boey. “So if interest rates fall or are lower a dollar tomorrow is valued more highly, but the RBA is pushing interest rates up, so that’s hurt the growth stocks.”

High global growth, inflation

BHP is also perceived as a beneficiary of commodity price inflation linked in part to the weak US dollar many analysts expect to extend a sell-off as US President Trump unsettles investors. US economic growth is also expected to be strong in 2026 even if it’s related to cheaper money and more debt that creates a positive environment for commodity prices.

In terms of its own operations, BHP is also betting big on copper as a key metal needed for the transition to net zero or carbon free energy.

Around half of its profits are expected to come from copper in financial 2026 to mean powerful fund managers are prepared to back its long term growth prospects, even if iron ore prices underwhelm on increased supply out of Africa.

“The thing about BHP, Rio and all the resources stocks is that this time last year they were on the nose and people [large investors] didn’t have much confidence in them, so they bought Aussie banks as a regional safe-haven,” said Mr Boey.

“And by last April global investors were also concerned about Chinese growth [on the Liberation Day tariff war], so the banks caught another bid as the alternative. But now people are thinking China looks ok, world growth is picking up, and the RBA is raising rates so the crowding has been reversed [into resources stocks] that have momentum and are also being chased by quant [hedge funds].”

End in sight

The tech wreck is also forcing local fund managers to get a handle on whether, or not, the software sector faces an existential threat from AI disruption or is just a steep valuation correction that may prove an opportunity to buy high-quality companies at a discount.

Brokers such as RBC Capital Markets have stated they think the indiscriminate selling is overdone, while others such as Macquarie have warned the pace of investment in AI by disruptive tech entrepreneurs like Elon Musk is something to take caution from.

While the tech analysts at Citi Australia slashed their share price valuation on Xero by 31 per cent to $144.80, but said the stock is still a buy given it tumbled 15.9 per cent to $80.82 on Thursday.

“We maintain our buy call but lower our target price reflecting lower peer multiples as well as lower medium-term and terminal growth assumptions,” Citi said.