What Happened?

A number of stocks fell in the morning session after markets became increasingly wary of high valuations following a significant AI-driven rally. The tech-heavy Nasdaq fell approximately 1.4% as a wave of caution swept through the market. 

A key example of this trend is Palantir Technologies, which saw its shares drop around 7% despite reporting record quarterly results that surpassed analyst estimates and raising its full-year revenue outlook. This seemingly contradictory movement highlighted a broader sentiment shift. Investors appeared to be engaging in profit-taking, concerned that the recent surge in AI-related stocks had led to stretched valuations. This broader market caution affected high-growth technology companies that had previously surged on AI optimism but faced increased scrutiny, signaling a potential cooling-off period for the sector. Adding serious weight to this caution, leadership at both Goldman Sachs and Morgan Stanley highlighted the possibility of a correction in the equity markets over the next couple of years. Despite the euphoria driven by AI optimism and the promise of future rate cuts, these banks viewed this cooling-off period not as a disaster, but as a necessary and healthy feature of a long-term bull market.

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:

• Online Marketplace company The RealReal (NASDAQ: REAL) fell 4.5%. Is now the time to buy The RealReal? Access our full analysis report here, it’s free for active Edge members.
• Online Marketplace company Shutterstock (NYSE: SSTK) fell 3%. Is now the time to buy Shutterstock? Access our full analysis report here, it’s free for active Edge members.

Zooming In On The RealReal (REAL)

The RealReal’s shares are extremely volatile and have had 70 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 2.8% on the news that optimism surged over a potential trade truce between the U.S. and China. Reports of progress in trade negotiations ahead of a scheduled meeting between the two nations' presidents fueled investor confidence. An agreement would likely ease trade tensions and reduce or remove tariffs that have created economic uncertainty and higher costs for many multinational corporations. Also, optimism improved on expectations that the Federal Reserve will cut interest rates later in the week, especially after recent data showed inflation wasn't heating up as much as expected. Simply put, good news on trade, and the promise of lower borrowing costs created a powerful rally.

The RealReal is up 14.9% since the beginning of the year, but at $11.30 per share, it is still trading 10.4% below its 52-week high of $12.61 from October 2025. Investors who bought $1,000 worth of The RealReal’s shares 5 years ago would now be looking at an investment worth $815.05.

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