What Happened?
A number of stocks fell in the afternoon session after competitive pressure from artificial intelligence continued to weigh on the software sector following a Bloomberg report that Anthropic expects its upcoming initial public offering to match or beat the size of SpaceX’s record-setting debut.
The Claude developer is preparing to file publicly as soon as the end of this month for a share sale that could rival or exceed SpaceX’s $75 billion initial offering, according to Bloomberg. The report noted that Anthropic raised $65 billion in May at a $965 billion valuation, and its preliminary second-quarter revenue topped $11.5 billion, with an annualized run rate hitting $65 billion by the end of July.
The accelerated timeline compounds existing sector concerns after OpenAI Chief Financial Officer Sarah Friar told employees her AI lab will also go public in 2027 or sooner, CNBC reported. As these frontier labs race to go public, they will gain more visibility. Investors will also be able to bet directly on these generative AI platforms, possibly denting the scarcity premium of enterprise SaaS companies, since the labs will boast recurring revenue with faster topline growth.
Going public will mean that these AI labs begin disclosing more information too, which could also show that they are taking wallet share of enterprise IT spend. These dynamics could combine to ultimately create a new trade of going long these labs, and shorting enterprise SaaS stocks.
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 Storage company MongoDB (NASDAQ: MDB) fell 4.6%. Is now the time to buy MongoDB? Access our full analysis report here, it’s free.
- Content Delivery company Cloudflare (NYSE: NET) fell 4%. Is now the time to buy Cloudflare? Access our full analysis report here, it’s free.
- Identity Management company Okta (NASDAQ: OKTA) fell 5.2%. Is now the time to buy Okta? Access our full analysis report here, it’s free.
- Network Security company Zscaler (NASDAQ: ZS) fell 4.6%. Is now the time to buy Zscaler? Access our full analysis report here, it’s free.
- Lending Software company Upstart (NASDAQ: UPST) fell 6.3%. Is now the time to buy Upstart? Access our full analysis report here, it’s free.
Zooming In On Upstart (UPST)
Upstart’s shares are extremely volatile and have had 55 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 biggest move we wrote about over the last year was 10 months ago when the stock dropped 13.2% on the news that the company reported mixed third-quarter results and provided a weaker-than-expected revenue forecast for the fourth quarter.
While the artificial intelligence (AI) lending platform's earnings per share of $0.52 beat the forecast of $0.42, its third-quarter revenue of $277.1 million fell just short of the $280.6 million expected. The primary concern for investors, however, was the company's forward-looking guidance. Management projected fourth-quarter revenue to be around $288 million, which was significantly below the Wall Street consensus estimate of $306.6 million. This downbeat outlook suggested that the company's growth could slow more than anticipated, leading to a negative reaction from the market despite the quarterly profit beat.
Upstart is down 37% since the beginning of the year, and at $28.86 per share, it is trading 60.9% below its 52-week high of $73.76 from August 2025. Investors who bought $1,000 worth of Upstart’s shares 5 years ago would now be looking at only $147.51.
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