What Happened?
Shares of creative software giant Adobe (NASDAQ:ADBE) fell 6.9% in the afternoon session after fears of disruption from artificial intelligence spooked investors, leading to a broad-based sell-off.
The market witnessed a "basket-style reaction," a term for when investors reduce exposure to an entire segment without differentiating between individual company business models. The negative sentiment was widespread, pulling down all of the Magnificent Seven stocks and sending the S&P 500 Information Technology Sector down nearly 3%.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Adobe? Access our full analysis report here, it’s free.
What Is The Market Telling Us
Adobe’s shares are not very volatile and have only had 6 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 21 days ago when the stock dropped 5.4% on the news that Oppenheimer downgraded the stock, adding to a growing chorus of concerns that the rise of Artificial Intelligence could hurt the company's business.
Oppenheimer lowered its rating on the software giant to "market perform" from "outperform." This move followed a recent downgrade from Goldman Sachs, which moved the stock to a "Sell" rating from "Buy." Analysts expressed worries that generative AI was making high-end design tools too accessible, increasing competitive pressure from AI-focused firms like Canva, Figma, and OpenAI. This skepticism marked the most pessimistic outlook from financial analysts for Adobe in over a decade. The concerns centered on the potential for slowing revenue growth and pressure on earnings, especially if Adobe needed to increase its own AI investments to compete.
Adobe is down 18.4% since the beginning of the year, and at $272.03 per share, it is trading 41.4% below its 52-week high of $464.11 from February 2025. Investors who bought $1,000 worth of Adobe’s shares 5 years ago would now be looking at an investment worth $564.43.
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