What Happened?

A number of stocks fell in the afternoon session after investors continued to distinguish between the winners and losers in the artificial intelligence boom, leading to a broad sell-off. The Nasdaq fell 1.5%, while the S&P 500 and Dow Jones Industrial Average also saw significant declines. This market shift indicated that investors were becoming more selective, moving beyond the initial excitement surrounding AI. In addition, a stronger-than-expected U.S. jobs report dampened investor expectations for near-term interest rate cuts from the Federal Reserve. Data showed the U.S. labor market remained resilient, with non-farm payrolls indicating impressive job creation and falling unemployment. This positive economic signal led markets to re-evaluate the timeline for monetary policy easing, which is the process by which a central bank reduces interest rates to stimulate economic growth. Investors priced in the first potential rate cut for July, a shift from previous expectations of June. This delay created a headwind for growth-oriented sectors like software, as higher interest rates can reduce the present value of future earnings.

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:

• Banking Software company Q2 Holdings (NYSE: QTWO) fell 7.8%. Is now the time to buy Q2 Holdings? Access our full analysis report here, it’s free.
• Data Analytics company Domo (NASDAQ: DOMO) fell 6.6%. Is now the time to buy Domo? Access our full analysis report here, it’s free.
• Marketing Software company Sprout Social (NASDAQ: SPT) fell 6.5%. Is now the time to buy Sprout Social? Access our full analysis report here, it’s free.
• Design Software company Unity (NYSE: U) fell 9.8%. Is now the time to buy Unity? Access our full analysis report here, it’s free.
• Banking Software company nCino (NASDAQ: NCNO) fell 8.3%. Is now the time to buy nCino? Access our full analysis report here, it’s free.

Zooming In On Unity (U)

Unity’s shares are extremely volatile and have had 61 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 2 days ago when the stock gained 4.5% on the news that Oppenheimer upgraded its rating on the stock to Outperform from Perform, citing improving fundamentals and dismissing fears about competitive threats from AI. The analyst set a $38 price target, arguing that concerns over "world models" like Google's Project Genie displacing game engines like Unity's were "fundamentally misplaced." Oppenheimer's positive view was based on the successful re-acceleration of the company's Grow segment and disciplined cost management. The upgrade provided a dose of optimism for the company, which was scheduled to announce its quarterly earnings. This positive sentiment contrasted with other views, such as UBS, which had lowered its price target on Unity to $32, citing rising competitive risks from Google's Project Genie.

Unity is down 55.7% since the beginning of the year, and at $19.60 per share, it is trading 60.4% below its 52-week high of $49.47 from December 2025. Investors who bought $1,000 worth of Unity’s shares 5 years ago would now be looking at an investment worth $155.43.

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