Freshworks (FRSH) Shares Plunge 1.15% on Skepticism Over AI Strategy Amid Broader Market Turbulence

Freshworks Inc. (NASDAQ: FRSH) shares declined 1.15% in pre-market trading, marking the third consecutive day of losses with a cumulative drop of 2.95% over the past three sessions. The stock hit an intraday low today, falling to its lowest level since October 2024 amid a 2.92% slide. The recent Investor Day event failed to galvanize investor confidence, with analysts and institutional players signaling skepticism about the company’s strategic execution and AI-driven growth plans.

The underperformance follows a broader trend of waning momentum for Freshworks, which has lost 14% year-to-date and 21.7% since the start of the year. Institutional investors, including Artisan Small Cap Fund, have reduced stakes in the company, citing concerns over the effectiveness of its AI transition. While some analysts, such as those at JMP Securities, maintain a “Market Outperform” rating with a $27.00 price target, the market has yet to respond to positive sentiment, as short-term volatility persists.

Broader macroeconomic pressures have compounded the stock’s challenges. Rising Treasury yields, with the 10-year note surpassing 4.2%, and regulatory uncertainties linked to trade policy have weighed on risk appetite. A federal court ruling invalidating key Trump-era tariffs further unsettled markets, exacerbating the sell-off. Freshworks’ inherent volatility—marked by 13 price swings of over 5% in the past year—has amplified these external pressures, particularly as the S&P 500 and Nasdaq face broader declines.

Institutional activity reflects a divided outlook. While Driehaus Capital Management and Wellington Management Group have increased holdings, firms like Generation Investment Management and AlpInvest Partners have trimmed positions. Insider transactions, including sales by executives and directors, have added to short-term jitters. However, proponents argue the current valuation offers an entry point for investors who believe in the company’s long-term AI integration potential, despite its underperformance relative to peers such as Nvidia and AMD.

For long-term holders, the stock’s erosion from its $19.75 52-week high to $12.45 underscores the risks of investing in high-growth tech firms amid macroeconomic turbulence. While the AI transition remains a core narrative, tangible progress in product adoption and market share gains has yet to materialize in a way that justifies renewed optimism. The path to recovery will depend on both improved execution of strategic initiatives and a stabilization in broader market conditions.