What Happened?
A number of stocks fell in the afternoon session after investors grew increasingly concerned that the billions of dollars being invested into artificial intelligence may not generate sufficient profits.
This sentiment fueled fears of a potential "AI bubble," leading to a significant downturn in the technology-heavy Nasdaq Composite index. The selloff was intensified after chipmaker Broadcom warned that increased sales of AI systems could lead to thinner profit margins, causing its stock to tumble. Subsequently, the broader market questioned whether the massive spending on chips and data centers would produce a worthwhile return on investment. This uncertainty caused a market recalibration, with investors rotating capital out of more speculative tech stocks and into more stable assets.
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:
- Hospitality & Restaurant Software company Agilysys (NASDAQ:AGYS) fell 2.6%. Is now the time to buy Agilysys? Access our full analysis report here, it’s free for active Edge members.
- Vertical Software company Guidewire Software (NYSE:GWRE) fell 5%. Is now the time to buy Guidewire Software? Access our full analysis report here, it’s free for active Edge members.
- Data Infrastructure company Teradata (NYSE:TDC) fell 3.6%. Is now the time to buy Teradata? Access our full analysis report here, it’s free for active Edge members.
- Video Conferencing company Zoom (NASDAQ:ZM) fell 2.9%. Is now the time to buy Zoom? Access our full analysis report here, it’s free for active Edge members.
- Video Conferencing company 8x8 (NASDAQ:EGHT) fell 4.8%. Is now the time to buy 8x8? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Guidewire Software (GWRE)
Guidewire Software’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 11 days ago when the stock dropped 1.5% on the news that the company announced third-quarter 2025 financial results that beat analyst expectations and included a raised full-year forecast.
This decline occurred despite the positive report, which detailed revenue of $332.6 million, up 26.5% from the prior year. The results surpassed estimates, and the company also lifted its full-year revenue guidance. Growth was supported by a 21.6% year-over-year increase in Annual Recurring Revenue (ARR), a key metric for software firms. The negative stock reaction may be a case of investors taking profits, as the shares had jumped 4.9% immediately following the announcement.
Guidewire Software is up 14.1% since the beginning of the year, but at $193.32 per share, it is still trading 26.2% below its 52-week high of $261.88 from September 2025. Investors who bought $1,000 worth of Guidewire Software’s shares 5 years ago would now be looking at an investment worth $1,528.
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