What Happened?

A number of stocks fell in the afternoon session after markets pulled back as a report raised concerns about artificial intelligence demand and profitability. 

Oracle shares lost more than 5% following news of its cloud business generating lighter margins than expected. According to internal documents cited in the report, the gross profit margin for this business was only 14%, a figure much lower than what analysts had expected. This suggested that the high costs of running the advanced chip infrastructure were weighing on profitability. Compounding these worries was the ongoing U.S. government shutdown, in its second week, with no clear resolution in sight from Washington. These updates drove investors away from riskier assets and towards safe havens, a trend highlighted by gold futures hitting a record $4,000 per ounce for the first time.

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:

• Developer Operations company GitLab (NASDAQ: GTLB) fell 6.4%. Is now the time to buy GitLab? Access our full analysis report here, it’s free for active Edge members.
• Document Management company DocuSign (NASDAQ: DOCU) fell 4.9%. Is now the time to buy DocuSign? Access our full analysis report here, it’s free for active Edge members.
• Sales Software company HubSpot (NYSE: HUBS) fell 5.8%. Is now the time to buy HubSpot? Access our full analysis report here, it’s free for active Edge members.
• Project Management Software company Asana (NYSE: ASAN) fell 3.8%. Is now the time to buy Asana? Access our full analysis report here, it’s free for active Edge members.
• Design Software company Unity (NYSE: U) fell 4.3%. Is now the time to buy Unity? Access our full analysis report here, it’s free for active Edge members.

Zooming In On GitLab (GTLB)

GitLab’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 5 days ago when the stock gained 3.9% on the news that a share sale catapulted OpenAI to a staggering $500 billion valuation, making it the world's most valuable startup and fueling broad optimism for artificial intelligence. 

The deal involved current and former employees selling approximately $6.6 billion in stock to investors, including Thrive Capital and SoftBank. This landmark valuation is having a ripple effect across the market, bolstering investor confidence in the entire AI ecosystem. The enthusiasm has helped propel the tech-heavy Nasdaq 100 and the broader S&P 500 to record highs, as investors increasingly see the technology sector as the primary driver of market growth.

GitLab is down 21.1% since the beginning of the year, and at $44.46 per share, it is trading 39.2% below its 52-week high of $73.14 from February 2025. Investors who bought $1,000 worth of GitLab’s shares at the IPO in October 2021 would now be looking at an investment worth $427.98.

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