What Happened?
A number of stocks jumped in the afternoon session after yields fell as the Trump administration announced a new peace deal that would lead to the reopening of the Strait of Hormuz.
Software companies are among the most sensitive to long-term interest rates because their valuations depend on earnings projected years ahead. The discount rate applied to those forward cash flows is derived from the risk-free rate, in practice, the 10-year Treasury yield. When that yield drops to 4.41%, its lowest since mid-May, valuations across the sector improve without a single new contract being signed.
Beyond the rate mechanics, the macro improvement matters for enterprise software specifically: customers who had deferred purchasing and renewal decisions during the period of geopolitical uncertainty now face a more settled planning environment.
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 C3.ai (NYSE: AI) jumped 3.5%. Is now the time to buy C3.ai? Access our full analysis report here, it’s free.
- Cloud Monitoring company Dynatrace (NYSE: DT) jumped 2.3%. Is now the time to buy Dynatrace? 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 previous big move we wrote about was 4 days ago when the stock gained 3.4% on the news that the Nasdaq rebounded, up 1.8%, as Trump's Iran peace deal announcement released the rate pressure that weighed on the sector.
Oil prices fell more than 3% following the cancellation of planned strikes on Iran, easing the inflation pressure that had been driving rate hike expectations. The 10-year Treasury yield fell to 4.47% from 4.55%, a move that expands the forward earnings multiples tech stocks trade on.
Every basis point of yield reduction matters more to a company priced on earnings years into the future than to almost any other sector. The combination of lower oil, lower yields, and geopolitical risk being removed from global supply chains was precisely the backdrop tech needed to recover after three consecutive sessions of selling.
C3.ai is down 17.8% since the beginning of the year, and at $11.31 per share, it is trading 61.2% below its 52-week high of $29.16 from July 2025. Investors who bought $1,000 worth of C3.ai’s shares 5 years ago would now be looking at only $197.47.
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