What Happened?

A number of stocks fell in the afternoon session after investors showed signs of fatigue with the AI-led rally, rotating out of high-valuation growth names. After a fantastic run, many of the high-flying AI and technology stocks saw investors take profits: selling shares to lock in their gains. This is often called a "market rotation." Money is moving out of the red-hot tech sector (which some worry has become too expensive) and into other parts of the market that investors may currently deem more stable or reasonably-priced. 

There's a secondary reason for the cautious mood: The long government shutdown came to an end. Though it's typically interpreted as good news, it also means a flood of delayed economic reports will be released. For weeks, investors were "flying blind" without key updates on the economy's health, like inflation data and the jobs report. In typical "sell the news" fashion, investors may also be taking profits and selling in anticipation that the new data would potentially give the Federal Reserve reasons to slow or even pause future rate cuts.

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:

• Marketing Software company Sprout Social (NASDAQ: SPT) fell 3.6%. Is now the time to buy Sprout Social? Access our full analysis report here, it’s free for active Edge members.
• Lending Software company Upstart (NASDAQ: UPST) fell 6.1%. Is now the time to buy Upstart? Access our full analysis report here, it’s free for active Edge members.
• Data Storage company DigitalOcean (NYSE: DOCN) fell 6.5%. Is now the time to buy DigitalOcean? Access our full analysis report here, it’s free for active Edge members.
• Advertising Software company AppLovin (NASDAQ: APP) fell 4.2%. Is now the time to buy AppLovin? Access our full analysis report here, it’s free for active Edge members.
• Hospitality & Restaurant Software company Toast (NYSE: TOST) fell 4.1%. Is now the time to buy Toast? Access our full analysis report here, it’s free for active Edge members.

Zooming In On DigitalOcean (DOCN)

DigitalOcean’s shares are extremely volatile and have had 40 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 8 days ago when the stock gained 16.1% on the news that the company reported third-quarter results that surpassed Wall Street's expectations and provided strong revenue guidance for the upcoming quarter. The cloud computing platform's revenue grew 15.7% year-over-year to $229.6 million, exceeding analyst estimates. Profitability was also a bright spot, with adjusted earnings per share of $0.54 beating expectations. The company significantly outperformed on other key metrics, with adjusted EBITDA and annual recurring revenue (ARR) both coming in well ahead of Wall Street's projections. Looking ahead, DigitalOcean guided for fourth-quarter revenue that was also above consensus. However, its earnings guidance for the next quarter fell short of estimates, adding a note of caution for investors.

DigitalOcean is up 33.5% since the beginning of the year, but at $45.74 per share, it is still trading 11.5% below its 52-week high of $51.67 from November 2025. Investors who bought $1,000 worth of DigitalOcean’s shares at the IPO in March 2021 would now be looking at an investment worth $1,076.

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