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:

• Endpoint Security company SentinelOne (NYSE: S) fell 3.7%. Is now the time to buy SentinelOne? Access our full analysis report here, it’s free for active Edge members.
• Data Infrastructure company Confluent (NASDAQ: CFLT) fell 3.4%. Is now the time to buy Confluent? Access our full analysis report here, it’s free for active Edge members.
• Data Analytics company Amplitude (NASDAQ: AMPL) fell 3.7%. Is now the time to buy Amplitude? Access our full analysis report here, it’s free for active Edge members.
• Marketing Software company Upland Software (NASDAQ: UPLD) fell 2.9%. Is now the time to buy Upland Software? Access our full analysis report here, it’s free for active Edge members.
• Data Analytics company Samsara (NYSE: IOT) fell 3.9%. Is now the time to buy Samsara? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Samsara (IOT)

Samsara’s shares are very volatile and have had 24 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 4 days ago when the stock gained 2.9% on the news that blockbuster quarterly results from tech titans Apple and Amazon boosted investor confidence, supported by impressive earnings from key cloud and crypto leaders, Cloudflare and Coinbase. 

Amazon's shares surged after reporting that its cloud computing division, Amazon Web Services (AWS), saw revenue jump 20% year-over-year to $33 billion. This accelerated growth is largely attributed to the high demand for computing power required for artificial intelligence applications. Apple also contributed to the positive sentiment, topping its own quarterly estimates and forecasting a record-breaking holiday quarter. The strong performance from these industry leaders has lifted the broader market. 

Impressive results from key cloud and crypto leaders, Cloudflare and Coinbase strongly supported the broader tech momentum. Cloudflare reported a "beat and raise" quarter with revenue soaring 30.7% year-over-year to $562 million and billings jumping nearly 40%, signaling strong future growth. Its non-GAAP operating margin expanded to 15.3%, and Free Cash Flow grew by nearly 60%, confirming management's efficient execution, leading the company to raise its full-year EPS guidance. Concurrently, Coinbase's third-quarter results also significantly topped estimates, driven by better-than-expected trading revenue and the increasing adoption of its stablecoin, USDC. The company reported $1.87 billion in revenue and an adjusted EPS of $1.44, while its strategic acquisition of Deribit advanced its "Everything Exchange" vision, resulting in over $840 billion in derivatives trading volume and aggressive expansion across the crypto market.

Samsara is down 12.1% since the beginning of the year, and at $38.69 per share, it is trading 36.5% below its 52-week high of $60.96 from February 2025. Investors who bought $1,000 worth of Samsara’s shares at the IPO in December 2021 would now be looking at an investment worth $1,566.

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