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:

• Data Analytics company Health Catalyst (NASDAQ: HCAT) fell 10.3%. Is now the time to buy Health Catalyst? Access our full analysis report here, it’s free for active Edge members.
• Design Software company Unity (NYSE: U) fell 7.5%. Is now the time to buy Unity? Access our full analysis report here, it’s free for active Edge members.
• Developer Operations company JFrog (NASDAQ: FROG) fell 3.7%. Is now the time to buy JFrog? Access our full analysis report here, it’s free for active Edge members.
• Data Analytics company Palantir Technologies (NASDAQ: PLTR) fell 5.1%. Is now the time to buy Palantir Technologies? Access our full analysis report here, it’s free for active Edge members.
• Data Storage company Snowflake (NYSE: SNOW) fell 3.8%. Is now the time to buy Snowflake? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Health Catalyst (HCAT)

Health Catalyst’s shares are extremely volatile and have had 47 moves greater than 5% over the last year. But moves this big are rare even for Health Catalyst and indicate this news significantly impacted the market’s perception of the business.

The previous big move we wrote about was about 21 hours ago when the stock dropped 7.3% on the news that its third-quarter earnings report revealed a weak financial outlook, which prompted a lower price target from analysts. 

Although the healthcare data analytics company beat Wall Street's revenue expectations, sales were flat compared to the previous year. More importantly, the company's revenue guidance for the next quarter came in below analysts' estimates, and its forecast for 2026 suggested a continued sales decline. Investors were concerned by several headwinds facing the company, including challenges in migrating clients to a lower-cost platform and pressure on customer retention. The company's professional services revenue also fell, and its cash reserves saw a significant decrease. In response to the weak outlook, analysts at Stifel lowered their price target on the stock, and other analysts also revised their earnings estimates downward.

Health Catalyst is down 69.9% since the beginning of the year, and at $2.21 per share, it is trading 75.5% below its 52-week high of $9.02 from December 2024. Investors who bought $1,000 worth of Health Catalyst’s shares 5 years ago would now be looking at an investment worth $64.09.

While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without. Click here to access our full research report.