ASX Tech Stocks Down 22%: Buy the Dip or Stay Away?

ASX tech stocks: Opportunity or Warning Sign?

The Australian tech sector has taken a big hit. The S&P/ASX 200 Information Technology Index (ASX: XIJ) has fallen 22% since mid-September, when it reached a record high of 3,060 points. In contrast, the broader ASX 200 has only slipped 2% over the same time. This sharp fall makes tech the worst-performing sector on the ASX in the past ten weeks.

Some brokers, like Wilsons Advisory, believe the sell-off is too extreme. They argue that certain strong companies could bounce back, with potential gains of up to 40%. But not all beaten-down stocks are worth buying. Investors are cautious, especially with the US Federal Reserve meeting on December 9–10, which could influence interest rate expectations and global market sentiment. So the big question remains: is this a chance to buy quality tech stocks at a discount or a warning to stay away until the dust settles?

What are the Best ASX Tech stocks to invest in right now?

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Why ASX Tech Has Fallen Harder Than Global Peers

Australian tech stocks have fallen much harder than overseas markets. The Nasdaq is down about 7% from recent highs, and the S&P 500 tech sector has slipped around 10%. In contrast, Australian tech has dropped much more, and not because companies are earning less.

According to Greg Burke from Wilsons Advisory, local issues are the main reason:

• Rising Australian bond yields have hurt growth stocks that are sensitive to interest rates.
• Governance problems at WiseTech Global have damaged confidence across the sector.

Importantly, this isn’t about profits collapsing. Many ASX tech companies are still growing their revenues at double-digit rates. The problem is that investors are paying less for those earnings, a process called valuation compression, because of rate worries and a few headline stumbles. For long-term investors, this difference matters: the businesses are still strong, but the market is nervous.

TechnologyOne and Life360: Two Names Worth Watching

Wilsons Advisory believes the recent tech sell-off has gone too far and sees value in select quality names. Among them, TechnologyOne (ASX: TNE) and Life360 (ASX: 360) stand out as offering attractive risk-reward for growth-focused investors.

TechnologyOne has slipped to around A$34 from above A$40, bringing its valuation back to more reasonable levels. The enterprise software firm continues to grow steadily, supported by loyal customers in government, education, and healthcare. Brokers suggest it could climb back towards A$42, offering solid upside.

Life360 has surged 149% in the past year, with strong revenue and cash flow growth. Its expanding user base and advertising push are turning it into a broader platform. While the stock is expensive, brokers still see further gains, though privacy and ad risks remain.

WiseTech: The Value Trap to Avoid

Not every tech stock that has fallen is worth buying. WiseTech Global (ASX: WTC) may look appealing after dropping about 40% from its 2025 peak above A$130 to the A$70-74 range, but the risks are significant.

In late October, ASIC and the Australian Federal Police raided WiseTech’s Sydney office over alleged share trading by founder Richard White and several employees during blackout periods. Earlier this year, four directors resigned in a single day, and AustralianSuper, the country’s largest pension fund, exited its entire A$580 million stake, citing governance concerns.

Although WiseTech’s CargoWise platform remains a global leader in logistics software, the ongoing regulatory investigation clouds the outlook. For long-term investors, this uncertainty makes WiseTech less attractive compared to other opportunities in the sector.

The Investor’s Takeaway

This ASX tech sell-off appears overdone for quality names with solid fundamentals and clean governance. TechnologyOne and Life360 both offer genuine growth stories at more reasonable valuations than just months ago. However, selectivity is key. The December Fed meeting could provide a catalyst if rate cut expectations firm up, but the broader lesson is simple: not all beaten-down stocks are bargains.

For investors willing to handle tech sector volatility, TechnologyOne’s defensible enterprise software business and Life360’s expanding user base make them worth watching.  WiseTech carries too much regulatory uncertainty to recommend right now.