AppLovin and Unity Software stocks were standouts for more reason than one reason on Thursday.

AppLovin and Unity stocks were soaring even as the broader stock market tumbled. Wall Street went on a selling spree following the midterm elections in which Democrats won control of the House of Representatives and Senate. Investors were grappling with what it would mean if tech giants were forced to slow their spending on the AI infrastructure buildout amid the potential implementation of more data center moratoriums.

The Nasdaq Composite was falling 5.1%. Meanwhile, AppLovin stock was surging 30% to $353.50 and was on pace for its largest percentage increase since Nov. 7, 2024. It was the best-performing stock in the S&P 500 on Thursday while the index dropped 3.4%.

AppLovin is a mobile advertising technology platform that connects advertisers with publishers. The company reported better-than-expected third-quarter financial results on Wednesday night. CEO Adam Foroughi said on the earnings call that during the quarter, AppLovin partially rolled out the next generation of its Axon AI models used by advertisers. That proved to be a success.

"Advertisers saw more spend deploying profitably at their target return on ad spend goals and budgets stepped up and our gaming business grew nearly 50% year-over-year reaccelerating right alongside the rollout," Foroughi said.

Meanwhile, shares of videogame software development company Unity were up 15% on Thursday. The company reported strong growth in its ad business for the third quarter Thursday morning thanks to Vector, Unity's AI ad system.

"When AppLovin's Axon or Unity's Vector deliver higher advertiser ROI, that translates very quickly into higher ad spend and revenue growth," says Macquarie analyst Aaron Lee.

Both AppLovin and Unity's results also followed earnings from Alphabet. While each of the smaller software firms posted results that showed stronger-than-expected performance in their ad businesses thanks to AI updates, Google's ad revenues for the third quarter of $82 billion missed analyst estimates of $83.6 billion.

Lee tells Barron's that even though Google is seeing strong AI-driven usage growth, management has acknowledged that AI Mode monetizes at a lower rate than traditional search. AI Mode is a conversational AI-powered search option for Google users.

"AI appears to be helping all three companies, but AppLovin and Unity are seeing a more immediate and visible monetization benefit because they're applying AI directly to performance advertising outcomes," Lee said. "Google, meanwhile, is still balancing monetization with user adoption and engagement as it evolves the search experience."