What Happened?
A number of stocks jumped in the afternoon session after a broad rally continued to suggest renewed investor interest in the sector.
The move was part of a wider trend that saw the broader software ETF (IGV) outperform the NASDAQ by 9% in the preceding week. This rally followed a period where software stocks had lagged the market. According to analysis from Morgan Stanley, investors were shifting their focus from general artificial intelligence excitement to software companies that provided practical and secure solutions for businesses. The firm noted that enterprise AI adoption was concentrated in targeted uses like software development and information retrieval, signaling a more mature phase of investment in the space.
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 Analytics company Health Catalyst (NASDAQ: HCAT) jumped 12.4%. Is now the time to buy Health Catalyst? Access our full analysis report here, it’s free.
- Advertising Software company AppLovin (NASDAQ: APP) jumped 9%. Is now the time to buy AppLovin? Access our full analysis report here, it’s free.
- Advertising Software company PubMatic (NASDAQ: PUBM) jumped 5.4%. Is now the time to buy PubMatic? Access our full analysis report here, it’s free.
- Automation Software company Pegasystems (NASDAQ: PEGA) jumped 5.9%. Is now the time to buy Pegasystems? Access our full analysis report here, it’s free.
Zooming In On Health Catalyst (HCAT)
Health Catalyst’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. But moves this big are rare even for Health Catalyst and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 6.2% on the news that software stocks rebounded as the market shook off growing uncertainty amid escalating tension in the Middle East. This previous sell-off, nicknamed the "SaaSpocalypse," was driven by investor fears that new artificial intelligence agents could disrupt and threaten the business models of enterprise software companies. The rally suggests investors are shifting from blind fear to a more nuanced view as they monitor the market for "AI Winners.".
Health Catalyst is down 14.3% since the beginning of the year, and at $1.96 per share, it is trading 57.5% below its 52-week high of $4.60 from March 2025. Investors who bought $1,000 worth of Health Catalyst’s shares 5 years ago would now be looking at an investment worth $41.62.
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