What Happened?

A number of stocks fell in the afternoon session after investors grew increasingly concerned that the billions of dollars being invested into artificial intelligence may not generate sufficient profits. 

This sentiment fueled fears of a potential "AI bubble," leading to a significant downturn in the technology-heavy Nasdaq Composite index. The selloff was intensified after chipmaker Broadcom warned that increased sales of AI systems could lead to thinner profit margins, causing its stock to tumble. Subsequently, the broader market questioned whether the massive spending on chips and data centers would produce a worthwhile return on investment. This uncertainty caused a market recalibration, with investors rotating capital out of more speculative tech stocks and into more stable assets.

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 HubSpot (NYSE: HUBS) fell 3.4%. Is now the time to buy HubSpot? Access our full analysis report here, it’s free for active Edge members.
• Banking Software company nCino (NASDAQ: NCNO) fell 3.6%. Is now the time to buy nCino? Access our full analysis report here, it’s free for active Edge members.
• Vulnerability Management company Rapid7 (NASDAQ: RPD) fell 3.4%. Is now the time to buy Rapid7? Access our full analysis report here, it’s free for active Edge members.
• Data Analytics company Health Catalyst (NASDAQ: HCAT) fell 3.3%. Is now the time to buy Health Catalyst? Access our full analysis report here, it’s free for active Edge members.

Zooming In On nCino (NCNO)

nCino’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 7 days ago when the stock gained 3.8% on the news that the company's Board of Directors authorized a new $100 million stock repurchase program. 

This move signaled management's confidence in the business's strength and future outlook. The new buyback followed the full use of a previous stock repurchase authorization. CEO Sean Desmond stated the decision reflected the company's commitment to using its capital to increase stockholder value. The announcement also came after the company reported positive third-quarter results, including revenue growth and margin expansion. 

A stock buyback reduces the number of shares on the market, which can increase the value of the remaining shares and often suggests that a company's leadership believes its stock is a good investment.

nCino is down 27% since the beginning of the year, and at $24.40 per share, it is trading 32.1% below its 52-week high of $35.96 from December 2024. Investors who bought $1,000 worth of nCino’s shares 5 years ago would now be looking at an investment worth $325.85.

While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without. Click here to access our full research report.