What Happened?
A number of stocks jumped in the afternoon session after stocks extended their rebound, led by strong gains in the technology sector, as renewed optimism surrounding U.S.–China trade negotiations lifted investor sentiment.
Contributing to the bullish tone was a standout earnings report from enterprise software leader ServiceNow, which topped Wall Street's expectations on RPO, profit, and earnings. More importantly, the company's remaining performance obligations (RPO), a key forward-looking metric for future revenue, gave investors confidence that enterprise customers were not pulling back spending amidst uncertain macro.
This optimism was further reinforced by solid results from Texas Instruments and Lam Research. Their performance was especially encouraging for semiconductor stocks, which had been under pressure due to their exposure to global trade tensions. These earnings results suggested that, despite macroeconomic uncertainties, demand in key tech verticals remained resilient.
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:
- Data Infrastructure company Confluent (NASDAQ: CFLT) jumped 7%. Is now the time to buy Confluent? Access our full analysis report here, it’s free.
- Marketing Software company Braze (NASDAQ: BRZE) jumped 7%. Is now the time to buy Braze? Access our full analysis report here, it’s free.
- Project Management Software company Asana (NYSE: ASAN) jumped 6.2%. Is now the time to buy Asana? Access our full analysis report here, it’s free.
- Data Infrastructure company C3.ai (NYSE: AI) jumped 7.9%. Is now the time to buy C3.ai? Access our full analysis report here, it’s free.
- Data Analytics company Domo (NASDAQ: DOMO) jumped 5.8%. Is now the time to buy Domo? Access our full analysis report here, it’s free.
Zooming In On C3.ai (AI)
C3.ai’s shares are extremely volatile and have had 35 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 biggest move we wrote about over the last year was 8 months ago when the stock dropped 19.8% on the news that the company reported weak second-quarter earnings and provided full-year sales and adjusted operating income guidance below Wall Street analysts' estimates. Also, sales were underwhelming against the backdrop of the ongoing AI hype, which likely raised expectations ahead of earnings. Notably, revenue came in ahead by a narrow margin. Overall, it was a mixed yet weaker quarter for the company, with the stock's reaction suggesting the market was likely expecting more.
C3.ai is down 36.8% since the beginning of the year, and at $21.92 per share, it is trading 49% below its 52-week high of $42.94 from December 2024. Investors who bought $1,000 worth of C3.ai’s shares at the IPO in December 2020 would now be looking at an investment worth $237.00.
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.
