What Happened?
A number of stocks fell in the morning session after 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.
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:
- Specialized Consumer Services company WeightWatchers (NASDAQ: WW) fell 3.5%. Is now the time to buy WeightWatchers? Access our full analysis report here, it’s free for active Edge members.
- Apparel and Accessories company Figs (NYSE: FIGS) fell 3.5%. Is now the time to buy Figs? Access our full analysis report here, it’s free for active Edge members.
- Consumer Electronics company Peloton (NASDAQ: PTON) fell 3.2%. Is now the time to buy Peloton? Access our full analysis report here, it’s free for active Edge members.
- Apparel and Accessories company Levi's (NYSE: LEVI) fell 2.8%. Is now the time to buy Levi's? Access our full analysis report here, it’s free for active Edge members.
- Broadcasting company Gray Television (NYSE: GTN) fell 2.8%. Is now the time to buy Gray Television? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Figs (FIGS)
Figs’s shares are very volatile and have had 29 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 20 days ago when the stock gained 5% on the news that BTIG initiated coverage on the stock with a "Buy" rating and a $9.00 price target. The firm's analyst, Robert Drbul, pointed to strong demand in the healthcare apparel sector as a reason for the positive outlook. This new rating represented a significant development for the healthcare apparel company, as it received fresh attention from market advisors. The initiation signaled confidence in the company's position within its industry.
Figs is up 25.6% since the beginning of the year, but at $7.40 per share, it is still trading 10.7% below its 52-week high of $8.28 from October 2025. Investors who bought $1,000 worth of Figs’s shares at the IPO in May 2021 would now be looking at an investment worth $246.44.
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