What Happened?
A number of stocks jumped in the afternoon session after the 10-year Treasury yield dropped below 4.5%, providing valuation relief amid a broader tech pullback.
While semiconductor stocks like Micron (-2%) and Cerebras (-10%) dragged the Nasdaq lower, software names like Salesforce and ServiceNow found relative support from falling yields. The 10-year Treasury yield fell below 4.5% as oil prices slid, signaling easing inflation pressures.
Software companies, particularly high-growth SaaS names, are highly sensitive to interest rates because their valuations are based on cash flows expected far in the future. When the 10-year yield drops, the discount rate applied to those future earnings decreases, mechanically boosting their present value. While the broader tech sector is undergoing a "recalibration of expectations" following the semiconductor run-up, falling yields validate the structural valuation floor for software stocks with recurring revenue models.
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:
- Vertical Software company Alarm.com (NASDAQ: ALRM) jumped 3.9%. Is now the time to buy Alarm.com? Access our full analysis report here, it’s free.
- Sales Software company ZoomInfo (NASDAQ: GTM) jumped 2.9%. Is now the time to buy ZoomInfo? Access our full analysis report here, it’s free.
Zooming In On Alarm.com (ALRM)
Alarm.com’s shares are not very volatile and have only had 7 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 2 months ago when the stock dropped 6.3% on the news that quarterly results from two major companies raised fresh questions about AI's impact on the sector.
IBM declined about 10% after reporting slower Q1 revenue growth, with weakness in its software business. ServiceNow also fell after noting that delayed deals in the Middle East, tied to the Iran conflict, would affect its subscription revenue growth. NOW also expects recent investments in AI to weigh on margins in the near term.
The sector-wide move reflected an ongoing debate. Some investors have questioned whether AI tools will reduce demand for traditional software or change existing license models. The results were likely read through that lens, which contributed to selling across software names beyond the two companies that reported. Though neither cause was strictly about AI suggesting the contagion was thematic not fundamental. Also, given ServiceNow was viewed as AI-resilient, its miss weakened the "safe SaaS" case, causing some analysts to lower their estimates.
Alarm.com is down 12.9% since the beginning of the year, and at $44.61 per share, it is trading 24.6% below its 52-week high of $59.16 from August 2025. Investors who bought $1,000 worth of Alarm.com’s shares 5 years ago would now be looking at only $527.55.
WHILE YOU’RE HERE: The Next Palantir? One satellite company captures images of every point on Earth. Every single day. The Pentagon wants it. Hedge funds are using it to beat earnings. You’ve probably never heard of it.
This is what the early days of Palantir looked like before it became a $437 billion giant. Same playbook. Different technology. If you missed Palantir, you need to see this. Claim The Stock Ticker for Free HERE.
