Williams, 33, was two wins from completing the calendar Grand Slam but lost 2-6 6-4 6-4 to unseeded Italian Roberta Vinci in the semi-finals.
“This is monumental. It’s a shocker,” Austin told BBC Sport.
“This is one of the biggest upsets in the history of tennis, because of what was on the line.”
Williams went into Friday’s semi-final on a 33-match winning streak in Grand Slams stretching back to Wimbledon 2014.
She had hoped to match Steffi Graf’s 1988 sweep off all four majors in the same year, and was up against a player she had beaten four times without dropping a set.
Vinci, 32, is ranked 43 in the world and was playing in her first Grand Slam semi-final.
“Roberta Vinci, are you kidding, she had a losing record coming into the US Open and somehow got hot,” added Austin.
“Things went her way, the draw opened up, Genie Bouchard hit her head and couldn’t play that match [in round four]. It’s just the way things happen sometimes.
“That’s why they put the net up every day. You’ve got to go out and handle the nerves.
“I always said Serena’s biggest opponent coming into this year’s US Open was going to be her own nerves.”
Williams was fulsome in her praise for Vinci, saying she “played literally out of her mind”, but the American was not in the mood to discuss her own feelings.
“I don’t want to talk about how disappointing it is for me,” she said. “If you have any other questions, I’m open for that.”
Tickets for the women’s final had sold out before the men’s for the first time ever as anticipation mounted in New York.
Williams insisted throughout the tournament that she was relaxed about the challenge, and after her defeat said: “I told you guys I don’t feel pressure. I never felt that pressure to win here. I said that from the beginning.”
Her four-year unbeaten run at Flushing Meadows is over but there was a glimmer of positivity after what has been an incredible run at the majors.
“I did win three Grand Slams this year,” said Williams. “Yeah, I won four in a row. It’s pretty good.”
Asked how nervous she felt Williams had become in the third set, Vinci was unequivocal: “A lot.”
The Italian, who won over the crowd with an extravagant celebration during the final set, had not taken more than four games in a set off Williams in four previous matches.
“This is the best match that I played in my life,” she said. “At the end when I made a break, 4-3, and served, I was a little bit scared. My arm was like (shaking). I’m not joking.
“But in my mind, I say, ‘Don’t think about this, because maybe you have more pressure. Stay calm, relax, and breathe during every single point.
“Don’t think that you have Serena on the other side of the court.’”
She will now meet her good friend Pennetta in the final, 16 years after they won the French Open junior doubles title together.
“It’s an incredible moment, but one Italian will win for sure,” said Vinci