Adobe Dips Amid AI Fears. Here Are the ETFs Affected
Shares of Adobe tumbled as much as 14% on Friday as investors fretted about AI’s impact on the firm.
The company, which is known for its editing and design software like Photoshop, holds a 2% weighting in the $255 billion Invesco QQQ Trust (QQQ) and a near-3% weighting in the $65 billion Technology Select Sector SPDR Fund (XLK).
Adobe reported better-than-expected earnings and revenues for the first quarter. However, its guidance for the second quarter fell short of analyst estimates for both earnings and revenues.
Perhaps more concerning, the company didn’t update its guidance for the full year, suggesting a lack of confidence—or at least clarity—for the outlook for the rest of the year.
For a company that operates in an industry that is being profoundly affected by the rapid advancements in AI, the lack of clarity caused investors to fear the worst.
“Adobe’s soft Q2 forecast and lack of full-year guidance play directly into investors’ narrative of AI-driven uncertainty within their operating environment,” noted analysts at Third Bridge.
AI Monetization in the Future
The analysts said that AI is a double-edged sword for the company. AI is Adobe’s “only non-linear growth opportunity,” but it also enables “nimble competitors to potentially take share in individual product segments.”
However, not all analysts were downbeat on Adobe. Anurag Rana, senior industry analyst for Bloomberg Intelligence said that he isn’t “overly concerned by [Adobe’s guidance] as [the company] is more focused on new users to its AI products and less on monetization.”
Rana said that “this is the right strategy and [he] anticipates an improvement in AI monetization,” especially in the fourth quarter into 2025.
In addition to QQQ and XLK, Adobe is held by 388 other, U.S.-listed ETFs.
The iShares Expanded Tech-Software Sector ETF (IGV), the Invesco Gen Media and Gaming ETF (GGME) and the Invesco NASDAQ Internet ETF (PNQI) hold the biggest weightings in Adobe, with more than a 7% allocation to the stock.
