What Happened?

A number of stocks fell in the afternoon session after investor apprehension intensified ahead of a key policy speech and perplexing inflation signals clouded the economic outlook, leading to a wider market retreat from growth-oriented stocks. 

The downturn in the market was largely attributed to a significant sell-off in megacap tech and chipmaker shares. Nvidia, Advanced Micro Devices (AMD), and Broadcom all saw notable drops, dragging down the VanEck Semiconductor ETF. Other major tech-related companies like Tesla, Meta Platforms, and Netflix were also under pressure. A key reason for this trend is that much of the recent market gains have been concentrated in the "AI trade," which includes these large technology and semiconductor companies. So this could also mean that some investors are locking in some gains ahead of more definitive feedback from the Fed.

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:

• Online Retail company Carvana (NYSE: CVNA) fell 4.3%. Is now the time to buy Carvana? Access our full analysis report here, it’s free.
• Consumer Subscription company Netflix (NASDAQ: NFLX) fell 3%. Is now the time to buy Netflix? Access our full analysis report here, it’s free.
• Consumer Subscription company Duolingo (NASDAQ: DUOL) fell 8.1%. Is now the time to buy Duolingo? Access our full analysis report here, it’s free.
• Financial Technology company Robinhood (NASDAQ: HOOD) fell 6.8%. Is now the time to buy Robinhood? Access our full analysis report here, it’s free.
• Consumer Subscription company Chegg (NYSE: CHGG) fell 7.7%. Is now the time to buy Chegg? Access our full analysis report here, it’s free.

Zooming In On Duolingo (DUOL)

Duolingo’s shares are extremely volatile and have had 34 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 1 day ago when the stock gained 13.5% on the news that it received bullish analyst coverage, including an upgrade from KeyBanc and a new 'Buy' rating from Citi. KeyBanc Capital Markets upgraded the stock to “Overweight” from “Sector Weight” and set a $460 price target, implying significant upside. Analysts at KeyBanc stated that the recent AI backlash was just “a bump in the road” and that fears of AI hurting the digital-education app are “overblown.” The firm highlighted Duolingo's product improvements and viral marketing as potential drivers for growth. 

Adding to the positive sentiment, Citi initiated coverage with a “Buy” rating and a $400 price target. Citi’s analysts argued that the stock price overstates AI-related risks and pointed to the company’s potential for long-term growth. This wave of analyst confidence follows Duolingo's strong second-quarter results reported earlier in August, where it beat estimates and raised its full-year revenue forecast.

Duolingo is up 4.5% since the beginning of the year, but at $340.66 per share, it is still trading 37% below its 52-week high of $540.68 from May 2025. Investors who bought $1,000 worth of Duolingo’s shares at the IPO in July 2021 would now be looking at an investment worth $2,451.

Today’s young investors won’t have read the timeless lessons in Gorilla Game: Picking Winners In High Technology because it was written more than 20 years ago when Microsoft and Apple were first establishing their supremacy. But if we apply the same principles, then enterprise software stocks leveraging their own generative AI capabilities may well be the Gorillas of the future. So, in that spirit, we are excited to present our Special Free Report on a profitable, fast-growing enterprise software stock that is already riding the automation wave and looking to catch the generative AI next.