Adobe shares plummeted 7.39% intraday, as the application software sector faced broad selling pressure. The decline was part of a wider rout in software stocks, which have been under significant valuation pressure this year.

According to fund manager Andrew Lapping of Ranmore Funds, software companies like Adobe have seen their valuations decline sharply as investors grow concerned that the adoption of artificial intelligence could disintermediate established business models. Lapping noted that stocks once trading at 30-40 times earnings have been knocked down to much lower multiples, as the market reassesses the risk of AI disruption. “Maybe at peak valuations these stocks were trading on a price-earnings multiples of 30-40 times, but not after the winnowing caused by AI fears,” Lapping said, naming Adobe as one of the beaten-down names that has recently attracted value-oriented attention.

Adding to the negative sentiment, bearish options activity was observed in Adobe, with put volume running at three times the expected level, signaling heightened expectations of further downside. The combination of systemic sector fears and aggressive bearish positioning helped drive the steep intraday decline.