Key Highlights

● Atlassian fell with the software sector, with no company-specific news cited.

● In a 45-stock software basket, 41 names fell, erasing roughly $130 billion.

● Palantir tumbled, erasing about $34 billion to $35 billion in market value.

● Netflix reports Oct 20, then Meta and Tesla on Oct 21.

No company news, just a sector rout

Atlassian (NASDAQ:TEAM) fell in Friday's session, ending among the decliners on the Nasdaq-100 as software stocks sold off across the board. Market reports noted the decline and cited no company-specific news, saying the shares moved with the sector.

Atlassian makes collaboration and project-management software used by development and business teams, including the Jira and Confluence products. Like many subscription software companies, its shares are sensitive to shifts in how investors value long-term growth, and Friday brought one of those shifts.

Software took a heavy hit

The selling in software was broad and intensified late in the day. In a 45-stock software basket tracked by market data, 41 names fell, erasing roughly $130 billion in market value. The iShares Expanded Tech-Software ETF, known as IGV, sank sharply after being only modestly lower earlier in the session.

Atlassian had plenty of company. Salesforce (NYSE:CRM) and ServiceNow (NYSE:NOW) both fell, with one report describing a steeper slide in ServiceNow by the close. Snowflake (NYSE:SNOW) tumbled to about $306.70 late in the day, despite positive JPMorgan partner checks. Declines were also reported in HubSpot (NYSE:HUBS), Datadog (NASDAQ:DDOG), Zscaler (NASDAQ:ZS) and Okta (NASDAQ:OKTA). Separately, KeyBanc downgraded Workday (NASDAQ:WDAY), per market reports.

Palantir (NASDAQ:PLTR), one of the sector's biggest names, tumbled and erased about $34 billion to $35 billion in market value, according to several reports.

The AI-financing question

The trigger for the selling was a change in how investors view artificial intelligence. According to market commentary, investors moved from asking what AI can do to asking how it will be financed. Debt-funded AI infrastructure companies, led by CoreWeave (NASDAQ:CRWV), were hit hardest, and the caution spread into software.

One market commentator described the shift: "The AI group is now splitting between companies that can fund the buildout themselves and those that have to borrow." The commentator added, "That is a change in character, and it's another reason the leaders no longer look like a safe haven."

Rates were part of the backdrop. The 10-year Treasury yield eased to roughly 5.1 at the close but remained near the highest levels in more than two decades after topping 5.3 earlier in October. Higher long-term yields tend to weigh on growth stocks whose value rests on future earnings.

A weak day for tech-heavy indexes

The Nasdaq Composite fell 572.99 points to 26,140.03, and the Nasdaq-100 also dropped sharply, though sources differed on the size of the decline. The S&P 500 lost 84.62 points to 7,659.44, while the Dow Jones Industrial Average slipped 175.28 points to 52,002.41. Technology was the weakest sector, while energy, utilities and consumer staples gained.

For the week, the Nasdaq Composite had its worst showing since the week ended June 26. The VIX rose 3.53 points to 19.99.

Atlassian Awaits Big Tech Earnings Reads

The Federal Reserve's next rate decision is due October 28. Fed Chair Kevin Warsh declined to preview it, saying, "I don't prejudge meetings." PCE inflation data follows on October 29.

Software investors will look to the coming wave of earnings for signs that AI investment is paying off. Netflix (NASDAQ:NFLX) reports on Tuesday, October 20, followed by Meta (NASDAQ:META) and Tesla (NASDAQ:TSLA) on Wednesday, October 21, and IBM (NYSE:IBM) and SAP (NYSE:SAP) the same evening, according to earnings calendars. Results and guidance from those companies could shape sentiment toward software names like Atlassian.