What Happened?
A number of stocks fell in the afternoon session as investors rotated from the high-multiple growth names that led the recent rally.
Software companies are priced on earnings projected years into the future, and the discount rate applied to those future cash flows is sensitive to both inflation expectations and the Federal Reserve’s rate path. The May import price data introduced the sharpest inflation surprise of the session: prices rose 1.9% against a 1.1% forecast, with an annual gain of 6.7%, the largest since August 2022. The data complicated the view that the Iran peace deal had cleanly resolved the inflation problem. Investors appeared to be rotating into cyclicals on falling oil and positioning cautiously ahead of new Chairman, Kevin Warsh’s first Federal Reserve meeting later in the week.
The Bank of America fund manager survey added structural pressure. Portfolio managers cut allocations to tech stocks broadly, naming an AI bubble as the second-largest tail risk, cited by 28% of respondents. SpaceX’s announcement that it is acquiring AI coding platform Cursor for $60 billion also contributed unease: the deal absorbs one of the most closely watched independent AI development tools into a mega-cap infrastructure play, signalling that the most valuable AI software assets are being consolidated rather than remaining available as standalone platforms.
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:
Zooming In On Health Catalyst (HCAT)
Health Catalyst’s shares are extremely volatile and have had 57 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 7 days ago when the stock dropped 2.6% on the news that Anthropic released new models (Claude Fable 5 and Claude Mythos 5) which were described as built for “the hardest knowledge work and coding problems.”
Mythos had been restricted for roughly two months under Project Glasswing, a managed rollout to select governments and enterprises designed to contain its cybersecurity risk profile before a wider release. That matters because the SaaSpocalypse thesis gets reinforced every time a more capable AI agent arrives. When Anthropic launched Claude Cowork in January, it triggered a $285 billion rout in software stocks in a single session, with Goldman’s US software basket falling.
