What Happened?
A number of stocks jumped in the afternoon session after investors continued to rotate out of high-flying semiconductors into beaten-down software stocks.
DigitalOcean's blowout preliminary results also supported the improved appetite as it showed proof that AI demand is converting into real, contracted revenue. The clearest signal is at the index level: the iShares software ETF (IGV) climbed roughly 7% over eight sessions even as the semiconductor SOXX fell ~8.5%. Microsoft rose ~3% on the week (after launching its $2.5B "Frontier" AI-services unit). ServiceNow and Salesforce each gained around +4%.
DigitalOcean pre-announced that remaining performance obligations (RPO) would exceed $800M, more than 10x year-over-year and up over $550M in the quarter, driven by multiple new nine-figure AI inference contracts, with average contract life stretching from 1.6 to over three years. Revenue growth was guided to accelerate to ~29% (from a prior 24–25% guide), and margins to the high end. Coming after Q1's 221% jump in AI-customer ARR, it's hard evidence that AI spend is landing as durable, contracted backlog, not just usage that can evaporate.
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:
- Vulnerability Management company Rapid7 (NASDAQ: RPD) jumped 7.8%. Is now the time to buy Rapid7? Access our full analysis report here, it’s free.
- Video Conferencing company Five9 (NASDAQ: FIVN) jumped 6%. Is now the time to buy Five9? Access our full analysis report here, it’s free.
- Video Conferencing company RingCentral (NYSE: RNG) jumped 7.8%. Is now the time to buy RingCentral? Access our full analysis report here, it’s free.
Zooming In On Rapid7 (RPD)
Rapid7’s shares are extremely volatile and have had 34 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 1 day ago when the stock gained 10% on the news that the stock rose amid a broad rally across the cybersecurity sector, lifting shares of many industry players.
The positive momentum was not isolated to Rapid7, as several major cybersecurity companies also experienced significant gains. Shares of CrowdStrike surged 5%, while Palo Alto Networks and Okta each climbed 4%. This widespread buying activity suggests a positive shift in investor sentiment for the entire cybersecurity complex, with traders extending a favorable view across the sector rather than reacting to news specific to Rapid7.
Rapid7 is down 21.5% since the beginning of the year, and at $11.20 per share, it is trading 56.2% below its 52-week high of $25.59 from July 2025. Investors who bought $1,000 worth of Rapid7’s shares 5 years ago would now be looking at only $111.64.
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