What Happened?
A number of stocks fell in the afternoon session after investors showed signs of fatigue with the AI-led rally, rotating out of high-valuation growth names.
After a fantastic run, many of the high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced.
There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.
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:
- Automation Software company Appian (NASDAQ:APPN) fell 4.9%. Is now the time to buy Appian? Access our full analysis report here, it’s free for active Edge members.
- Data Infrastructure company C3.ai (NYSE:AI) fell 5.3%. Is now the time to buy C3.ai? Access our full analysis report here, it’s free for active Edge members.
- Data Analytics company Domo (NASDAQ:DOMO) fell 7.2%. Is now the time to buy Domo? Access our full analysis report here, it’s free for active Edge members.
- Vulnerability Management company Qualys (NASDAQ:QLYS) fell 3.6%. Is now the time to buy Qualys? Access our full analysis report here, it’s free for active Edge members.
- E-commerce Software company Shopify (NASDAQ:SHOP) fell 5.3%. Is now the time to buy Shopify? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Domo (DOMO)
Domo’s shares are extremely volatile and have had 32 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 9 days ago when the stock dropped 5.1% on the news that markets became increasingly wary of high valuations following a significant AI-driven rally.
The tech-heavy Nasdaq fell approximately 1.4% as a wave of caution swept through the market. A key example of this trend is Palantir Technologies, which saw its shares drop around 7% despite reporting record quarterly results that surpassed analyst estimates and raising its full-year revenue outlook. This seemingly contradictory movement highlighted a broader sentiment shift. Investors appeared to be engaging in profit-taking, concerned that the recent surge in AI-related stocks had led to stretched valuations.
This broader market caution affected high-growth technology companies that had previously surged on AI optimism but faced increased scrutiny, signaling a potential cooling-off period for the sector. Adding serious weight to this caution, leadership at both Goldman Sachs and Morgan Stanley highlighted the possibility of a correction in the equity markets over the next couple of years. Despite the euphoria driven by AI optimism and the promise of future rate cuts, these banks viewed this cooling-off period not as a disaster, but as a necessary and healthy feature of a long-term bull market.
Domo is up 74.2% since the beginning of the year, but at $12.35 per share, it is still trading 32.1% below its 52-week high of $18.20 from September 2025. Investors who bought $1,000 worth of Domo’s shares 5 years ago would now be looking at an investment worth $360.06.
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