Australian investors pulled back from tech companies in the latter half of 2025, but fund managers and analysts say AI will continue to create waves for sharemarkets in the year ahead after a volatile 12 months that has left the local bourse lagging its global peers.
In New Year’s Eve’s trading session, the ASX200 was on track to deliver a 6.1 per cent return for the year, trailing Wall Street’s S&P500, which gained about 17 per cent, as well as similar indexes in the UK, Germany, Japan, Canada and Hong Kong which climbed more than 20 per cent.
As geopolitical conflicts intensified and US President Donald Trump spooked the world with widespread tariffs in 2025, investors pulled out of traditional growth sectors such as health and technology, flocking instead to safety in commodities such as gold.
Since the beginning of the year, the healthcare sector has shed about 25 per cent of its value and information technology companies have lost 22 per cent, while gold prices shot up more than 60 per cent for the year with Northern Star, the country’s biggest gold miner, soaring 72 per cent.
Ten Cap founder and fund manager Jun Bei Liu says while it is difficult to see gold prices continuing to grow at breakneck pace, resources companies should keep performing reasonably well.
‘It’s not a shockingly bad outcome.’
Gemma Dale, NAB director for investor behaviour
“This will be underpinned by commodities such as copper and aluminium because of the requirements from the energy transition, and even iron ore with China steadily coming back,” she says.
Meanwhile, she says it has been a more difficult year for technology and healthcare companies.
“In November, we saw significant amounts of selling across technology companies, even when they delivered great results,” she said, citing software company Technology One. “There were also a couple of large companies such as healthcare giant CSL, which downgraded its earnings and really disappointed investors.”
Liu says this partly reflects the failure of these companies to manage expectations, but also investors being more impatient than they have been in the past when it comes to companies that fall short of expectations.
NAB director for investor behaviour Gemma Dale says the Australian sharemarket ended the year on a subdued note, but it could have been a lot worse.
“It’s not a shockingly bad outcome,” she says, considering geopolitical risks and trade tensions throughout the year, concerns about whether consumers could stomach rising interest rates, and the fact that banks – which account for about 30 per cent of the market – had already “run exceptionally hard” coming into the year.
The financials sector – including the banks – ended the year 7 per cent higher. Its performance is crucial to the wider market, as it makes up more than a third of the ASX.
Dale says there was a broad shift in funds towards defence companies amid geopolitical tensions this year. Defence contractor Electro Optic Systems was up sevenfold for the year and shipbuilder Austal’s share price more than doubled.
Investors sold off shares in DroneShield in October and November following a huge rally earlier in the year, but the company’s shares closed the year more than 300 per cent higher, making it the best performer on the ASX200.
Shares in DroneShield more than halved from their record high during October and November after the company’s top brass sold all their shares without explanation. The sell-down came after a massive rally earlier in the year, fuelled by a series of significant contracts, meaning the drone defence company finished the year still more than 300 per cent higher, making it the best performer on the ASX 200.
“Obviously, there can be some governance issues when a company [like DroneShield] goes from very small to quite large, quite quickly, but it was interesting to see how many people were interested in it and were happy to have a dabble in that space,” Dale says.
Liu characterises 2025 as a “year of two halves”, beginning with Trump’s tariffs earlier in the year which dampened investor sentiment.
“The tariffs created a pretty rare buying opportunity in the market where investors sold everything,” she said. “Once we recalibrated, the sharemarket made one of its strongest returns from the trough.”
Dale says the session following the April 2 “Liberation Day” – when Trump imposed his sweeping tariffs – was the most active day for trading. That selling activity, however, reversed into a “relief rally” when the tariff announcements were subsequently walked back.
“It’s quite fascinating how quickly markets were happy to discount all of those previous very dramatic statements,” she says.
While shares in many technology companies were sold off quite substantially in the second half of the year amid concerns valuations may have run up too high, Liu says they now present good value opportunities for investors.
“I think tech companies will steadily make a comeback,” she says. “Because, ultimately, these are the companies that are underpinned by structural growth drivers.”
She also says AI is likely to remain a key theme in the year ahead.
“For the past couple of years, investor interest has been captured by companies directly involved with AI infrastructure such as data centres,” she says, “But I think from 2026 onwards, it will be about which companies will benefit from AI investments, and the sectors which are currently very heavily manual but could digitise and see cost efficiencies.”
Jessica Amir, market strategist at trading platform Moomoo, says robust demand for AI and chips means there is likely to be continued growth in prices for inputs such as gold, silver and platinum.
“Platinum demand is rising from automotive, industrial, and jewellery sectors,” she says. “And as the price of the metal rises, investment demand for platinum rises too.”
She also notes that while there could be further falls in the AI sector in the short term due to anxieties around the technology, it will likely be the strongest growth sector through to 2030.
Capital.com senior financial market analyst Kyle Rodda says differences in central bank policies around the world will also play a key role, with markets expecting the Reserve Bank to hike interest rates again next year, while borrowing costs in other major economies fall or remain stable.
“It’ll be another reason why I think we will underperform out global peers next year,” he says.
“It’s going to be a world of higher prices for a little while, lower growth, and therefore a less prosperous economy and lower returns.”
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Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via Twitter or email.
