What Happened?
A number of stocks fell in the afternoon session after investors continued to distinguish between the winners and losers in the artificial intelligence boom, leading to a broad sell-off.
The Nasdaq fell 1.5%, while the S&P 500 and Dow Jones Industrial Average also saw significant declines. This market shift indicated that investors were becoming more selective, moving beyond the initial excitement surrounding AI. In addition, a stronger-than-expected U.S. jobs report dampened investor expectations for near-term interest rate cuts from the Federal Reserve. Data showed the U.S. labor market remained resilient, with non-farm payrolls indicating impressive job creation and falling unemployment. This positive economic signal led markets to re-evaluate the timeline for monetary policy easing, which is the process by which a central bank reduces interest rates to stimulate economic growth. Investors priced in the first potential rate cut for July, a shift from previous expectations of June. This delay created a headwind for growth-oriented sectors like software, as higher interest rates can reduce the present value of future earnings.
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:
- E-commerce Software company Shopify (NASDAQ: SHOP) fell 7.5%. Is now the time to buy Shopify? Access our full analysis report here, it’s free.
- Lending Software company Upstart (NASDAQ: UPST) fell 8.5%. Is now the time to buy Upstart? Access our full analysis report here, it’s free.
- Video Conferencing company 8x8 (NASDAQ: EGHT) fell 5.4%. Is now the time to buy 8x8? Access our full analysis report here, it’s free.
- Tax Software company BlackLine (NASDAQ: BL) fell 6.8%. Is now the time to buy BlackLine? Access our full analysis report here, it’s free.
- HR Software company Asure Software (NASDAQ: ASUR) fell 5%. Is now the time to buy Asure Software? Access our full analysis report here, it’s free.
Zooming In On Upstart (UPST)
Upstart’s shares are extremely volatile and have had 71 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 7 days ago when the stock dropped 7.8% on the news that the "AI replacement" narrative reached a fever pitch following the release of new models from Anthropic and OpenAI.
The simultaneous debut of Anthropic's Claude Opus 4.6 and OpenAI's "Frontier" agent platform raised concerns that autonomous agents are no longer just tools, but new operating systems that can cannibalize traditional software. This suggests that specialized applications might be reduced to mere features within frontier models, rendering legacy seat-based licensing models increasingly obsolete. The catalyst is the models' unprecedented agentic power. Opus 4.6’s "software hunting" capability allows it to autonomously audit and patch complex codebases, while OpenAI's Frontier platform bypasses traditional CRM and ticketing interfaces to perform enterprise work directly. By commoditizing sophisticated workflows into low-cost API calls, these releases threaten the recurring revenue of software giants. As AI builds bespoke tools on demand, the market is aggressively repricing the entire software application layer.
Upstart is down 33.9% since the beginning of the year, and at $30.32 per share, it is trading 65.8% below its 52-week high of $88.77 from February 2025. Investors who bought $1,000 worth of Upstart’s shares 5 years ago would now be looking at an investment worth $296.68.
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