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:
- Specialized Technology company Arlo Technologies (NYSE: ARLO) fell 6.3%. Is now the time to buy Arlo Technologies? Access our full analysis report here, it’s free for active Edge members.
- IT Services & Consulting company Kyndryl (NYSE: KD) fell 3.3%. Is now the time to buy Kyndryl? Access our full analysis report here, it’s free for active Edge members.
- IT Distribution & Solutions company CDW (NASDAQ: CDW) fell 6.1%. Is now the time to buy CDW? Access our full analysis report here, it’s free for active Edge members.
- IT Services & Consulting company Grid Dynamics (NASDAQ: GDYN) fell 2.7%. Is now the time to buy Grid Dynamics? Access our full analysis report here, it’s free for active Edge members.
- Hardware & Infrastructure company Hewlett Packard Enterprise (NYSE: HPE) fell 2.5%. Is now the time to buy Hewlett Packard Enterprise? Access our full analysis report here, it’s free for active Edge members.
Zooming In On Arlo Technologies (ARLO)
Arlo Technologies’s shares are very volatile and have had 20 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 25 days ago when the stock dropped 3.8% on the news that President Trump threatened a 'massive increase in tariffs' on Chinese imports, reigniting fears of a renewed US-China trade war. The unexpected comments, made in response to Beijing's plans to tighten export controls on rare-earth minerals, reversed early market gains and sent major indices tumbling. Rare-earth minerals are crucial for components used in the electronics and automotive industries. The tech sector led the losses, with the tech-rich Nasdaq Composite falling 1.7%. The threat jolted Wall Street, sparking concerns that escalating trade tensions could disrupt global supply chains and increase costs for many technology companies that rely on components or manufacturing from China.
Arlo Technologies is up 61.6% since the beginning of the year, and at $17.73 per share, it is trading close to its 52-week high of $19.44 from October 2025. Investors who bought $1,000 worth of Arlo Technologies’s shares 5 years ago would now be looking at an investment worth $3,756.
Do you want to know what moves the business you care about? Add them to your StockStory watchlist and every time a stock significantly moves, we provide you with a timely explanation straight to your inbox. It’s free for active Edge members and will only take you a second.
