Chip, memory, and power stocks rallied on September 4 while Adobe and Palantir shares sold off sharply the same day. Adobe fell after naming a new chief executive, and Palantir dropped as investors moved away from richly valued software names, even though both companies posted strong quarterly growth.
Chip, memory, connectivity, and power stocks rallied on September 4, while Adobe and Palantir shares sold off sharply on the same day. Adobe fell 6.7% after the company said Anil Chakravarthy will become chief executive on December 1. Palantir dropped 4.5% as investors pulled back from richly valued software names. The rotation tests whether markets are underestimating software's ability to monetize AI or correctly pricing in greater disruption risk.
Adobe's leadership change meets AI pricing worries
Adobe's case for optimism rests on its distribution across creative, document, and marketing workflows. Fiscal second-quarter revenue rose 13% to a record $6.62 billion. Its AI-first annualized recurring revenue more than tripled to above $500 million. Chakravarthy currently runs Adobe's customer-experience orchestration business, which could connect AI creation tools with enterprise activation.
But the bear case centers on pricing: low-cost generative tools could erode what Adobe charges, and the leadership transition complicates execution. Insider Monkey counted 81 hedge funds holding Adobe stock at June 30, down from 86 at March 31. Arrowstreet Capital disclosed 6,787,022 shares, roughly 0.1% fewer than the prior quarter — a filing that predates the leadership announcement.
Palantir's results support its bull case
Palantir's bull case is already visible in results. Second-quarter revenue grew 93% to $1.94 billion. U.S. commercial revenue rose 149%. Adjusted operating margin reached 62%, and its software can turn model output into governed operational decisions.
Still, the bear case rests on valuation, contract concentration, termination clauses, and the risk that current growth rates normalize as competitors improve. Hedge fund ownership fell: 86 funds held Palantir in the second quarter, down from 96 in the first. ARK Investment Management, led by Cathie Wood, reported 3,212,286 shares, about 3.3% more than the prior quarter.
Short interest and the road ahead
Short sellers are not betting heavily against Palantir. An August 14 exchange-reported settlement showed 68,278,633 shares sold short, 3.14% of float, with 1.1 days to cover, a level that does not suggest a crowded structural hedge. Hardware won Friday because near-term AI capacity demand looks tangible, but software can still capture more durable margins if adoption produces paid workflows.
Adobe must show that AI protects, rather than cannibalizes, its creation revenue; Palantir must sustain growth that justifies its valuation. Adobe's September 10 earnings report will offer the nearer test, while Palantir's contract conversion and remaining-deal-value growth provide the longer one.
Source: Insider Monkey
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