What Happened?
A number of stocks fell in the afternoon session after investor fears over artificial intelligence disrupting the software industry sparked a broad sell-off. The anxiety stemmed from the rapid adoption of new 'agentic AI' tools, which some investors believed could dismantle traditional Software-as-a-Service (SaaS) business models. This 'AI Panic' led to indiscriminate selling across the sector. The market move reflected growing concerns about the downside of the AI boom for established software companies.
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:
- Video Conferencing company Zoom (NASDAQ:ZM) fell 4.4%. Is now the time to buy Zoom? Access our full analysis report here, it’s free.
- Content Delivery company Akamai Technologies (NASDAQ:AKAM) fell 3.9%. Is now the time to buy Akamai Technologies? Access our full analysis report here, it’s free.
- Data Analytics company Health Catalyst (NASDAQ:HCAT) fell 4.4%. Is now the time to buy Health Catalyst? Access our full analysis report here, it’s free.
- Endpoint Security company SentinelOne (NYSE:S) fell 3.7%. Is now the time to buy SentinelOne? Access our full analysis report here, it’s free.
- Advertising Software company PubMatic (NASDAQ:PUBM) fell 3.7%. Is now the time to buy PubMatic? Access our full analysis report here, it’s free.
Zooming In On Health Catalyst (HCAT)
Health Catalyst’s shares are extremely volatile and have had 48 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 5 days ago when the stock dropped 6.8% on the news that investors continued to distinguish between the winners and losers in the artificial intelligence boom, leading to a broad sell-off. The Nasdaq fell 1.5%, while the S&P 500 and Dow Jones Industrial Average also saw significant declines. This market shift indicated that investors were becoming more selective, moving beyond the initial excitement surrounding AI. In addition, a stronger-than-expected U.S. jobs report dampened investor expectations for near-term interest rate cuts from the Federal Reserve. Data showed the U.S. labor market remained resilient, with non-farm payrolls indicating impressive job creation and falling unemployment. This positive economic signal led markets to re-evaluate the timeline for monetary policy easing, which is the process by which a central bank reduces interest rates to stimulate economic growth. Investors priced in the first potential rate cut for July, a shift from previous expectations of June. This delay created a headwind for growth-oriented sectors like software, as higher interest rates can reduce the present value of future earnings.
Health Catalyst is down 24.2% since the beginning of the year, and at $1.73 per share, it is trading 68.8% below its 52-week high of $5.55 from February 2025. Investors who bought $1,000 worth of Health Catalyst’s shares 5 years ago would now be looking at an investment worth $34.08.
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