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:

• Hardware & Infrastructure company Xerox (NASDAQ: XRX) fell 6.7%. Is now the time to buy Xerox? Access our full analysis report here, it’s free for active Edge members.
• Advertising & Marketing Services company Magnite (NASDAQ: MGNI) fell 4.4%. Is now the time to buy Magnite? Access our full analysis report here, it’s free for active Edge members.
• Industrial & Environmental Services company Pitney Bowes (NYSE: PBI) fell 3.2%. Is now the time to buy Pitney Bowes? Access our full analysis report here, it’s free for active Edge members.
• Specialized Technology company PAR Technology (NYSE: PAR) fell 3.4%. Is now the time to buy PAR Technology? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Xerox (XRX)

Xerox’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 5 days ago when the stock dropped 7.2% on the news that the company reported third-quarter results that missed revenue expectations, overshadowing a significant beat on profit. The document technology company posted revenue of $1.96 billion, falling short of analyst estimates of $2.03 billion. While this represented a strong 28.3% increase year-on-year, the miss on the top line appeared to be the primary concern for investors. This disappointment came despite Xerox reporting an adjusted profit of $0.20 per share, which was substantially better than the consensus forecast of a loss of $0.18 per share. The market's negative reaction suggests that investors were more focused on the sales shortfall as a potential indicator of weaker demand, despite the company's better-than-expected profitability during the quarter.

Xerox is down 63.5% since the beginning of the year, and at $3.02 per share, it is trading 69.3% below its 52-week high of $9.84 from January 2025. Investors who bought $1,000 worth of Xerox’s shares 5 years ago would now be looking at an investment worth $165.18.

While Wall Street chases Nvidia at all-time highs, an under-the-radar semiconductor supplier is dominating a critical AI component these giants can’t build without. Click here to access our full research report.