What Happened?
A number of stocks fell in the afternoon session after fears of disruption from artificial intelligence spooked investors, leading to a broad-based sell-off.
The market witnessed a "basket-style reaction," a term for when investors reduce exposure to an entire segment without differentiating between individual company business models. The negative sentiment was widespread, pulling down all of the Magnificent Seven stocks and sending the S&P 500 Information Technology Sector down nearly 3%.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- HR Software company Paylocity (NASDAQ:PCTY) fell 6.7%. Is now the time to buy Paylocity? Access our full analysis report here, it’s free.
- Vulnerability Management company Qualys (NASDAQ:QLYS) fell 6.3%. Is now the time to buy Qualys? Access our full analysis report here, it’s free.
- Video Conferencing company 8x8 (NASDAQ:EGHT) fell 5.8%. Is now the time to buy 8x8? Access our full analysis report here, it’s free.
- Tax Software company BlackLine (NASDAQ:BL) fell 6.8%. Is now the time to buy BlackLine? Access our full analysis report here, it’s free.
- Advertising Software company AppLovin (NASDAQ:APP) fell 6.8%. Is now the time to buy AppLovin? Access our full analysis report here, it’s free.
Zooming In On AppLovin (APP)
AppLovin’s shares are extremely volatile and have had 59 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago when the stock dropped 5.6% on the news that a scathing report from short-seller CapitalWatch alleged the software firm had become a "safe haven" for illicit funds and had ties to a global money laundering syndicate.
The report claimed AppLovin's capital structure was deeply intertwined with moving billions in "black money" from Chinese Ponzi schemes and Cambodian fraud rings into U.S. markets. The investigation focused on AppLovin's main shareholder, Hao Tang, who was described as a fugitive linked to a collapsed financial platform. CapitalWatch also alleged the company's software allowed illicit apps, such as those for illegal gambling, to be implanted on user devices without their consent. This process allegedly allowed criminal groups to pay massive advertising fees to AppLovin, turning illegal funds into legitimate revenue.
AppLovin is down 27% since the beginning of the year, and at $451.10 per share, it is trading 38.5% below its 52-week high of $733.60 from December 2025. Investors who bought $1,000 worth of AppLovin’s shares at the IPO in April 2021 would now be looking at an investment worth $6,920.
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