The S&P/ASX200 dropped 145.4 points on Friday, down 1.64 per cent to 8,743.8, as the broader All Ordinaries tumbled 169.3 points, or 1.85 per cent, to 8,985.6.
The drop followed a chaotic overnight session on Wall Street, with its three major indices falling more than 1.2 per cent as investors dumped stocks, commodities and cryptocurrency.
"Global markets continued to exhibit a clear risk-off tone overnight, with sizeable drops in silver and crypto and softer partial labour market data weighing on traditional asset markets," Westpac economist Ryan Wells said.
"Equities sold off considerably, driven by concerns over artificial intelligence valuations which saw the VIX 'fear' index rise to its highest level so far this year."
All 11 local sectors were trading lower by lunchtime, with energy stocks and miners falling more than 2.5 per cent as commodity prices crumbled.
Mining giant BHP slipped 2.7 per cent to $49, as iron ore futures dropped to six-month lows, while Rio traded just above flat after ruling out a merger with Glencore.
Gold miners were a sea of red as the precious metal dropped to $US4,757 ($A6,875) an ounce.
Battery minerals miners, rare earths producers and mixed explorers were all bleeding lower by midday.
The energy sector was a similar colour, with Woodside and Santos each down more than 1.6 per cent, while coal miners also sold off, and oil extended its decline ahead of US-Iran talks in Oman later on Friday.
Uranium producers were under pressure amid concerns about AI and the global data centre build-out, as Deep Yellow clocked the top-200's worst performance with a more than 11 per cent dip.
The heavyweight financials sector fell almost one per cent, with all big four banks in the red, but Commonwealth Bank was relatively sturdy with a less than 0.1 per cent dip to $159.21.
Consumer discretionary stocks dropped more than two per cent as JB Hi-Fi, Aristocrat Leisure and Light & Wonder sold off.
Web Travel shares cratered by more than 28 per cent on news its Spanish subsidiary was being audited by the national tax agency.
The real estate segment fell more than three per cent, tracking with an even bigger loss for Goodman group in a broad-based sell-off.
IT stocks continued to plunge, dropping more than five per cent to 12-month lows.
Cryptocurrency bitcoin tanked to its lowest level since October 2024 and is down almost 50 per cent from its high of more than $US126,000 ($A182,086).
"The move lower in bitcoin overnight reflects a violent leverage unwind rather than a deterioration in fundamentals," Zerocap Analyst Emir Ibrahim said.
"Thin order books combined with elevated positioning saw forced liquidations cascade through the market."
Communications stocks were also under pressure, dropping 2.6 per cent by lunchtime, as real estate digital advertiser REA Group tumbled 9.8 per cent after its first half results undershot expectations, despite boosting revenue by five per cent year-on-year.
The Australian dollar is buying 69.20 US cents, down from 69.72 US cents on Thursday, the Aussie under pressure from lower commodity prices and a dip in risk sentiment.
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