What Happened?
A number of stocks fell in the afternoon session after concerns regarding lofty artificial intelligence valuations triggered a pullback in the technology sector.
Nvidia slid 3% ahead of its earnings report, dragging down fellow "Magnificent Seven" peers despite a major partnership announcement with Anthropic, as investors increasingly question the durability of the AI rally. Market sentiment was further dampened by Bitcoin dropping below $90,000, signaling reduced risk appetite, and growing anxiety that the Federal Reserve may pause rate cuts in December, with the implied probability of a cut falling to roughly 50%. Adding to the weakness, Home Depot shares declined following an earnings miss and a cut to its full-year outlook. This combination of continued de-risking and valuation skepticism put the S&P 500 on pace for its fourth consecutive daily decline.
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:
- Sales Software company Freshworks (NASDAQ: FRSH) fell 2.6%. Is now the time to buy Freshworks? Access our full analysis report here, it’s free for active Edge members.
- Sales Software company HubSpot (NYSE: HUBS) fell 2.8%. Is now the time to buy HubSpot? Access our full analysis report here, it’s free for active Edge members.
- HR Software company Asure Software (NASDAQ: ASUR) fell 2.8%. Is now the time to buy Asure Software? Access our full analysis report here, it’s free for active Edge members.
Zooming In On HubSpot (HUBS)
HubSpot’s shares are quite volatile and have had 19 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 12 days ago when the stock dropped 17.1% on the news that the company reported third quarter earnings, with high expectations heading into the prints making it hard to impress Wall Street.
The company posted revenue of $809.5 million, a 20.9% year-on-year increase that surpassed analyst estimates, while adjusted earnings per share of $2.66 also came in higher than anticipated. Furthermore, HubSpot's revenue guidance for the upcoming fourth quarter was slightly above what analysts were forecasting. However, the positive results were not enough to satisfy investor expectations. The market reaction suggested that investors were hoping for a more significant beat and a stronger forecast, leading to a sell-off as the results were perceived as insufficient to support the stock's valuation at the time.
HubSpot is down 48.3% since the beginning of the year, and at $360.73 per share, it is trading 56% below its 52-week high of $819.71 from February 2025. Investors who bought $1,000 worth of HubSpot’s shares 5 years ago would now be looking at an investment worth $1,004.
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