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This story features NEXTDC LIMITED, and other companies.
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The company is included in ASX50, ASX100, ASX200, ASX300, ALL-ORDS and ALL-TECH
The Australian share market defied rising interest rates and persistent inflation to outperform global peers in October, as the unwinding of the AI trade sparked a rotation in market leadership, with banks and defensives emerging as the winners.
- AI Funding Fears Trigger Global Market Rotation
- Australian Banks Defy Economic Headwinds
- Resources Caught In The AI Trade Unwind
- Healthcare Shines As Market Leadership Shifts
By Danielle Ecuyer
Australian market outperforms (yes, really)
October was the month when the AI trade hit the proverbial skids.
Time will tell whether the AI bubble is ready to burst, but bond and equity investors had increasingly been questioning valuations, funding costs and the sustainability of the enormous AI infrastructure investment cycle.
The sell-off across AI-related stocks, which started in neo-clouds, chip and memory companies, spread to adjacent sectors, including resources, pulling down Australia’s Materials sector.
Think copper and uranium as two obvious, straightforward examples.
See also https://fnarena.com/2026/10/27/uranium-week-u308-joins-sell-the-ai-trade/
Arguably, a confluence of factors combined to a general mood change that led to indiscriminate profit taking, putting markets in risk-off mode.
The long list of potential triggers includes the failed Firmus IPO locally, the pulling of the AirTrunk IPO in Singapore, rising bond yields relegating neo-cloud companies to junk status, US mid-term election jitters around data centre developments, and reported hedge funds deleveraging in this year’s extremely profitable and extremely crowded AI trade.
Notably, Macquarie points towards the US 10-year yield reaching 5.36% on October 7, its highest since 2002, before recording its largest one-day decline since 2023 on October 22, as Meta’s escalating AI spending and capital-raising plans rattled equity markets.
The general concern centred on whether the enormous AI investment commitments could generate sufficient returns, and whether financing pressures would ultimately force a slowdown in spending.
There were coincidental reverberations on the ASX, with NextDC ((NXT)) shares plummeting -45.8% on the announced deferral of power supply to its expanding M3 data centre in Melbourne, forcing management to subsequently issue a FY27 earnings downgrade.
Electrical contractor SKS Technologies ((SKS)), with exposure to the M3 build-out, was swept up in the selling, its shares tumbling -43.7%.
For more on NextDC, see https://fnarena.com/2026/10/26/nextdcs-collision-with-the-real-world/
Maas Group ((MGH)) also took a -45.6% hit to its share price due to its equity stake in Firmus, with investment bankers pulling the float on October 9.
Globally, the sell-the-AI-trade and buy-the-non-AI-trade trend reverberated across markets and country performances.
Australia, despite being in the firestorm of high inflation and rising interest rates, weathered the global AI sell-off reasonably well.
The ASX200 rose 1.35% in October against a -5.3% decline in the Nasdaq and a -16.9% fall in Korea, with the Nikkei225 and Hang Seng both down over -5%.
Investors positioned in the ASX20, which gained 2.7%, probably had a big smile on their faces.
Australia’s key index, like the FTSE and Germany’s DAX, respectively up 1.2% and 2%, has relatively low AI exposure compared to the US and select Asian markets.
Digging into sector ups & downs
Investors continued to nibble away at the Resources outperformance over the last year.
October marked a notable rotation, with the leadership baton handed to Financials, which made the largest index contribution, Morgan Stanley notes, at 228bps, including 181bps from Banks.
Healthcare continued its strength, adding 44bps, followed by Consumer Discretionary at 24bps and Industrials at 16bps.
Morgan Stanley notes the contribution from Financials reversed the -215bps negative impact over August and September.
Seems like the historically popular trade to buy banks into the reporting season and cum-dividend period remained alive and well, despite the adverse macro headwinds of a slowing economy, falling house prices and rising interest rates.
Ironically, as highlighted by Macquarie, three of the four Big Banks, CommBank ((CBA)), Westpac ((WBC)) and National Australia Bank ((NAB)), carry the highest short interests in the ASX50.
Utilities was the month’s top-performing sector, up 9.3%, as investors sought risk-off defensive exposure. Financials followed, up 6.9%, Healthcare gained 5.6% and Consumer Discretionary lifted by 3.6%, largely led by Wesfarmers ((WES)).
Over the last three months, Healthcare has been the standout performer, up 37.35%. Information Technology continues to lag, down -8.06% in October and retaining the wooden spoon on a 12-month basis, down -39.57%.
These sectors include a suite of stocks in the ASX20, with the Big Banks and Macquarie Group ((MQG)) representing around 43% of the local large cap index.
Conversely, Materials weakened further, down -9.18%, with big-cap copper producers like BHP Group ((BHP)) losing -5.4%.
The gold sector and base metals were equally on the receiving end. Gold equities retreated by -8.7%. Over the month, the gold price fell -2.74%.
Copper, ironically, managed to buck the trend, up 1.06% but it was the price of iron ore instead that weakened by -6.23%.
Lithium stocks also came under pressure, with Liontown ((LTR)) shares off -33.3% and PLS Group down -31.6%. Macquarie notes reports of a CATL output cut during the month.
Uranium stocks were swept up in the AI-proxy trading. Paladin Energy ((PDN)) shares soured by -21.3% and Deep Yellow dived by -38.9%.
Small Cap Resources fell -14%.
While the unwinding of the AI trade was undoubtedly one factor, weaker commodity prices and rising operating costs were also weighing on the Materials sector broadly.
Rising diesel prices were another factor. The negative trend in quarterly updates by mining companies revolved around higher costs.
Rotation into defensives boosts REITs
The rotation into defensives was also evident in property stocks, with moderating bond yields providing some relief for the sector.
UBS observes A-REITs returned 1.7% in October and outperformed the ASX200 by 0.3%. Globally, REITs rose 1.9% in October in USD terms.
UBS attributes the sector performance to the moderation in the Australian 10-year bond yield, down -20bps from a 15-year high to 5.14%.
The CPI inflation rate for the September quarter, released in October, was seen universally by the RBA and commentators as “too high”, prompting another cash rate hike by 25bps for a fifth increase this year to 4.85%.
Many an economist would like to think the local tightening cycle cannot possibly involve more hikes but some, like UBS, are still not 100% convinced.
UBS now foresees a “long pause” but also believes two more hikes down the track seem more likely than none.
While the AI trade, including data centre companies, sold off, the demand for business credit remains robust due to the AI cycle. It rose 11.3% y/y in October.
Good luck trying to find an electrician!
UBS notes the A-REIT sector is trading at a -14.4% discount to estimated fair value, using combined NAV/discounted cash flow price targets, with an FY27 forecast distribution yield of 3.8%.
Excluding the investment managers in that sector, think Goodman Group ((GMG)), Charter Hall ((CHC)) and Centuria Capital Group ((CNI)), the FY27 forecast distribution yield rises to 5.7%.
Morgan Stanley points out takeover activity remained pronounced, with targets including Cleanaway Waste Management ((CWY)) and Challenger ((CGF)), as well as Northern Star ((NST)).
The ASX outlook and the rate cycle
The 12-month forward PER for the ASX200 rose by 0.26 to 17.4x.
A big jump in forecasts for the Energy sector (up 22.5%) lifted the consensus EPS forecast by 0.8%, though generally speaking the trend in earnings forecasts remains negative as quarterly production reports disappoint and consumer spending related companies report sagging sales momentum.
Heightened tensions in the Middle East saw over a 14% rise in West Texas Crude and over an 11% rise in Brent, taking the Energy sector up 1.56% for the month.
UBS points out the median crowding score across the Energy sector rose around 8 points, the largest move for any sector.
Consumer Discretionary and Utilities rose 3-plus points, and Financials evidenced the largest fall, down around -4 points, while the median crowding score in Information Technology fell further and is now at -4.7 points.
As an aside, UBS analysis highlights the top crowded names in the ASX200 in October were Evolution Mining ((EVN)), BlueScope Steel ((BSL)) and Orica ((ORI)).
Macquarie detailed US Value beat Growth by 8.9 percentage points, but in Australia Growth beat Value by 1.5 percentage points, attributed to ASX Growth representing fewer AI enablers.
Stocks like WiseTech Global ((WTC)) rallied off 52-week lows, also reflecting the anti-AI trade because of less perceived disruption to traditional SaaS business models.
WiseTech crowned itself the top Mid Cap 50 performer, rising 25.7%, followed by another SaaS company, Pro Medicus ((PME)). Takeover targets Challenger and Cleanaway were the next top performers, up 18.3% and 15.8%, respectively.
US small caps beat large caps by 4 percentage points, while ASX small caps lagged by -8.6 percentage points due to higher exposure to mining.
The Macquarie FOMO Meter slipped -0.11 to plus 0.66 in October and remained positive throughout the AI sell-off.
At this stage, the broker is retaining a “defensive tilt” for longer, even though November is usually the start of a seasonally stronger period for stocks.
Regarding further RBA rate hikes, Macquarie thinks it is increasingly likely the November 3 rate hike will be the last, with the consumer and housing economies to remain weak, while AI capex spending could slow over FY27, offering more of a headwind, or less of a tailwind, to growth and demand pressures.
Other strong performers throughout the month include Light & Wonder ((LNW)) –with financial results out this week– Data#3 ((DTL)) and SiteMinder ((SDR)) –on strong market updates– and Arena REIT ((ARF)) as bond yields retreated, institutions start anticipating the end of RBA tightening and problems with one key renter have been partially resolved.
Shareholders in NextDC and Maas Group Holdings will not be in the same jolly mood when confronting respective management teams at their AGMs later this month.
Having said so, is there any substance to rumoured takeover interest for the fallen data centres operator?
ASX100 Best and Worst Performers of the month (in %)
| Company | Change | Company | Change |
|---|---|---|---|
| WTC – WISETECH GLOBAL LIMITED | 25.72 | NXT – NEXTDC LIMITED | -45.80 |
| PME – PRO MEDICUS LIMITED | 19.69 | LTR – LIONTOWN LIMITED | -33.33 |
| CGF – CHALLENGER LIMITED | 18.31 | PLS – PLS GROUP LIMITED | -31.61 |
| CWY – CLEANAWAY WASTE MANAGEMENT LIMITED | 15.83 | IGO – IGO LIMITED | -23.38 |
| LNW – LIGHT & WONDER INC | 14.97 | PDN – PALADIN ENERGY LIMITED | -21.29 |
ASX200 Best and Worst Performers of the month (in %)
| Company | Change | Company | Change |
|---|---|---|---|
| DTL – DATA#3 LIMITED. | 32.85 | ELS – ELSIGHT LIMITED | -62.68 |
| WTC – WISETECH GLOBAL LIMITED | 25.72 | SRL – SUNRISE ENERGY METALS LIMITED | -47.88 |
| ARF – ARENA REIT | 25.00 | NXT – NEXTDC LIMITED | -45.80 |
| PME – PRO MEDICUS LIMITED | 19.69 | ELV – ELEVRA LITHIUM LIMITED | -43.54 |
| CGF – CHALLENGER LIMITED | 18.31 | 4DX – 4DMEDICAL LIMITED | -42.59 |
ASX300 Best and Worst Performers of the month (in %)
| Company | Change | Company | Change |
|---|---|---|---|
| DTL – DATA#3 LIMITED. | 32.85 | ELS – ELSIGHT LIMITED | -62.68 |
| WTC – WISETECH GLOBAL LIMITED | 25.72 | BRE – BRAZILIAN RARE EARTHS LIMITED | -48.49 |
| ARF – ARENA REIT | 25.00 | SRL – SUNRISE ENERGY METALS LIMITED | -47.88 |
| SDR – SITEMINDER LIMITED | 24.54 | NXT – NEXTDC LIMITED | -45.80 |
| PME – PRO MEDICUS LIMITED | 19.69 | MGH – MAAS GROUP HOLDINGS LIMITED | -45.56 |
ALL-TECH Best and Worst Performers of the month (in %)
| Company | Change | Company | Change |
|---|---|---|---|
| DTL – DATA#3 LIMITED. | 32.85 | ELS – ELSIGHT LIMITED | -62.68 |
| WTC – WISETECH GLOBAL LIMITED | 25.72 | NXT – NEXTDC LIMITED | -45.80 |
| SDR – SITEMINDER LIMITED | 24.54 | 4DX – 4DMEDICAL LIMITED | -42.59 |
| PME – PRO MEDICUS LIMITED | 19.69 | WBT – WEEBIT NANO LIMITED | -38.92 |
| HSN – HANSEN TECHNOLOGIES LIMITED | 14.19 | OFX – OFX GROUP LIMITED | -31.71 |
All index data are ex dividends. Commodities are in USD.
Australia & NZ
| Index | 31 Oct 2026 | Month Of Oct | Quarter To Date (Oct-Dec) | Year To Date (2026) |
|---|---|---|---|---|
| NZ50 | 13797.000 | -0.27% | -0.27% | 1.84% |
| All Ordinaries | 9025.40 | 0.63% | 0.63% | 0.03% |
| S&P ASX 200 | 8908.10 | 1.35% | 1.35% | 2.22% |
| S&P ASX 300 | 8813.70 | 1.09% | 1.09% | 1.51% |
| Communication Services | 1588.10 | 3.25% | 3.25% | -8.77% |
| Consumer Discretionary | 3683.70 | 3.54% | 3.54% | -7.75% |
| Consumer Staples | 13177.70 | 0.54% | 0.54% | 13.43% |
| Energy | 11056.20 | 1.56% | 1.56% | 32.16% |
| Financials | 9823.70 | 6.91% | 6.91% | 5.22% |
| Health Care | 34777.80 | 6.32% | 6.32% | 2.92% |
| Industrials | 8226.10 | 2.34% | 2.34% | -2.37% |
| Info Technology | 1621.00 | -3.45% | -3.45% | -24.75% |
| Materials | 22212.60 | -7.81% | -7.81% | 5.16% |
| Real Estate | 3362.90 | 1.50% | 1.50% | -15.21% |
| Utilities | 10730.10 | 9.34% | 9.34% | 11.10% |
| A-REITs | 1569.80 | 1.67% | 1.67% | -14.02% |
| All Technology Index | 2818.80 | 0.93% | 0.93% | -17.01% |
| Banks | 4142.50 | 7.68% | 7.68% | 1.82% |
| Gold Index | 17080.60 | -8.72% | -8.72% | -8.53% |
| Metals & Mining | 7583.00 | -8.71% | -8.71% | 4.35% |
The World
| Index | 31 Oct 2026 | Month Of Oct | Quarter To Date (Oct-Dec) | Year To Date (2026) |
|---|---|---|---|---|
| FTSE100 | 10729.78 | 1.17% | 1.17% | 7.94% |
| DAX30 | 25818.21 | 2.46% | 2.46% | 5.42% |
| Hang Seng | 23294.42 | -5.36% | -5.36% | -9.90% |
| Nikkei 225 | 63290.11 | -5.19% | -5.19% | 25.73% |
| NZ50 | 13797.000 | -0.27% | -0.27% | 1.84% |
| DJIA | 51770.31 | 1.70% | 1.70% | 7.04% |
| S&P500 | 7580.07 | -0.93% | -0.93% | 9.92% |
| Nasdaq Comp | 25437.00 | -5.30% | -5.30% | 8.62% |
Metals & Minerals
| Index | 31 Oct 2026 | Month Of Oct | Quarter To Date (Oct-Dec) | Year To Date (2026) |
|---|---|---|---|---|
| Gold (oz) | 4067.26 | -2.74% | -2.74% | -7.27% |
| Silver (oz) | 54.16 | -11.88% | -11.88% | -30.49% |
| Copper (lb) | 6.6700 | 1.06% | 1.06% | 17.39% |
| Aluminium (lb) | 1.3966 | -5.24% | -5.24% | 4.42% |
| Nickel (lb) | 7.0027 | -2.69% | -2.69% | -6.47% |
| Zinc (lb) | 1.7818 | -0.76% | -0.76% | 27.86% |
| Uranium (lb) weekly | 89.75 | 0.00% | 0.00% | 9.45% |
| Iron Ore (t) | 90.70 | -6.23% | -6.23% | -15.34% |
Energy
| Index | 31 Oct 2026 | Month Of Oct | Quarter To Date (Oct-Dec) | Year To Date (2026) |
|---|---|---|---|---|
| West Texas Crude | 101.73 | 14.41% | 14.41% | 77.17% |
| Brent Crude | 113.95 | 11.16% | 11.16% | 87.26% |
Do note: the charts above also reflect the early trading sessions in November.
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