ASX edges higher as big banks rise; NextDC tanks after profit warning

The Australian sharemarket wavered in early trade, with gains by the Big Four banks and consumer stocks wiped out by a plunge in tech, where data centre operator NextDC lost more than 40 per cent of its market value after a profit warning.

The S&P/ASX 200 was up just 4.3 points, or 0.05 per cent, at 8821.20 at around 11am AEST, with banks, consumer stocks and defensive sectors pacing gains while the tech sector lost almost 6 per cent. The ASX lost 0.3 per cent on Tuesday. The Australian dollar was trading at US70.06¢.

NextDC lost more than 40 per cent of its sharemarket value in the first half hour of trade and was down 44 per cent at 11am after the data centre operator came out of a trading halt slashing its sales and profit forecasts for the year.

The profit warning came as the company faces delays in the power supply for its controversial M3 data centre expansion in Melbourne, due to community resistance to the grid upgrade, with concerns about noise, emissions and massive power poles close to their homes.

NextDC said sales are now expected to reach $475 million to $500 million, down from a previous estimate of $615 million to $640 million, and operating earnings would be between $245 million to $265 million, down from its forecast of up to $410 million. The company is looking at “capital recycling opportunities” including the sale of development sites to help it weather the crunch.

Other local tech stocks were mixed after the shock downgrade, with software maker WiseTech slipping 0.3 per cent while Xero added 0.1 per cent. Cloud connections provider Megaport was down 2.7 per cent and family tracking app Life 360 climbed 2.8 per cent.

Energy and mining stocks also struggled. Oil giants Woodside and Santos were down 0.4 per cent and flat, respectively, as Brent crude slipped 0.7 per cent, easing below $US109 a barrel again. Talks aimed at reaching a deal between the US and Iran are continuing, according to a diplomat involved in the negotiations, who pushed back against reports that an agreement was close.

Copper heavyweights BHP and Rio Tinto extended their declines from Tuesday, when BHP said its copper production in the September quarter had slumped by almost 20 per cent as key mines in Chile were affected by weather and lower-quality ore. BHP shares were down by another 1.2 per cent, while Rio dropped 1.6 per cent.

Meanwhile, banks, consumer stocks and defensive sectors such as utilities, real estate and communication services advanced. All Big Four banks were higher, gaining between 0.4 per cent (Westpac) and 1 per cent (CBA).

Futures for Wall Street’s Nasdaq 100 jumped 1 per cent in the morning AEDT after Elon Musk’s SpaceX reported quarterly net income that more than doubled estimates, sending its shares up more than 5 per cent in late trading. Contracts for the S&P 500 rose 0.5 per cent.

Super Micro Computer also topped expectations, lifting AI-infrastructure shares in extended trading. The company has benefited from surging spending on equipment used to train and run AI models. The results offered some reassurance after concerns over AI valuations and financing rattled technology shares last week.

“There are no signs that demand for AI is slowing,” said Angelo Kourkafas at Edward Jones. “We’re seeing healthy scepticism and a maturation of the theme, moving away from an environment where everything AI-related goes up toward a greater focus on quality and the companies with the deepest pockets to finance the investment needed to meet demand.”

During regular trading hours, the S&P 500 added 0.3 per cent. The Dow Jones Industrial Average rose 1 per cent, while drops for several big technology stocks including Apple and Meta Platforms weighed on the Nasdaq composite, which ended down less than 0.1 per cent.

Musk said SpaceX and Tesla have formed special committees to explore a potential merger, a preliminary step toward what would rank as the largest corporate tie-up of all time.

“I do think there’s a lot of merit to combining the companies,” Musk, the chief executive officer of both companies, said on SpaceX’s earnings webcast. “There’s a lot to be gained from cooperating on developing superintelligence software.”

SpaceX reported after the closing bell, posting its first profit as a public company with $US4.4 billion in net income for the September quarter, topping the average analyst projection of $US1.88 billion. Quarterly revenue stood at $US14.6 billion, compared with analysts’ estimate of $US12.7 billion, buoyed by a surge in its AI business and steady growth at its Starlink satellite-internet unit.

Meanwhile, AI startup Anthropic recorded a net loss of more than $US80 billion in the first half of this year, including $US72 billion in accounting charges, the Wall Street Journal reported on Tuesday, citing a draft initial public offering prospectus.

Stock prices tend to follow the path of corporate profits over the long term, and several companies delivered results for the latest quarter that were better than analysts expected. Big expectations for growth generally are what have allowed the US stock market to hit records recently despite worries about high inflation, higher interest rates and other challenges weighing on Wall Street.

Hasbro climbed 11.2 per cent after the toy company said its Magic: The Gathering game made more than $US600 million during a quarter for the first time. 3M rose 5.8 per cent after the company behind Ace bandages and Scotch-Brite sponges likewise reported a stronger-than-expected profit, even as shoppers broadly feel discouraged by high inflation.

Stocks also got a lift after the price for a barrel of Brent crude eased after reaching nearly $US112 and approaching its highest price since the war with Iran began in late February. The drop in oil prices will relieve some of the pressure on inflation, if it lasts. Brent’s price has been yo-yoing between $US97 and $US112 per barrel on uncertainty about when oil supply will return to normal.

Keeping the US market in check was General Motors, which sank 6.8 per cent despite reporting a bigger profit than analysts expected. It also announced a program to send up to $US20 billion to investors by buying back its stock.

The pressure is on companies to deliver bigger profits not only now, but also in the future. GM gave a forecasted range for profit over the full year of 2026 whose midpoint fell short of analysts’ expectations.

AI stocks, meanwhile, continued to swirl. They’ve been at the centre of the market’s recent uneasiness, as euphoria around the technology’s boom gives way to worries that high interest rates in the bond market will slow the borrowing that’s allowed companies to buy so many AI chips. Last week was the US stock market’s worst since June because of weakness for AI-related companies.

CoreWeave has been particularly shaky. It initially fell more than 6 per cent at the start of Tuesday’s trading, only to swing to a gain of 5 per cent before pulling back to a rise of 1.7 per cent.

Such reversals are nothing new for the company, which has borrowed money to buy AI chips that it rents out to customers over the cloud. A day earlier, it careened between a gain of 7 per cent in the morning and a loss of 3.5 per cent in the afternoon following last week’s tumble of roughly 25 per cent.

In other international markets, indexes in Europe pared bigger losses from earlier in the day. The CAC 40 in Paris slipped 0.4 per cent, and the FTSE 100 in London fell 0.3 per cent.

with AP, Bloomberg, Reuters

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