Why Cloudflare (NET) Stock Is Plummeting Today

Recent Developments Affecting Cloudflare

Cloudflare (NYSE:NET), a leader in cloud security and performance, experienced an 8.5% decline in its share price during the afternoon trading session. This drop was triggered by investor concerns about the disruptive potential of artificial intelligence, which led to a widespread sell-off across the technology sector. Investors responded with what is known as a "basket-style reaction," indiscriminately reducing their holdings in the entire sector rather than evaluating individual companies. As a result, all of the Magnificent Seven stocks saw declines, and the S&P 500 Information Technology Sector fell by nearly 3%.

The downward pressure intensified after Anthropic, an AI company, introduced a new suite of automation tools designed for the legal industry. This move sparked further selling throughout the software sector. The market’s response highlighted a broader anxiety: if a foundational AI company can successfully create products that disrupt specialized fields like legal technology, then no software niche appears immune to similar threats.

Market reactions to news can often be exaggerated, and significant price drops may create attractive entry points for investors seeking quality stocks. Considering this, is it a good moment to invest in Cloudflare?

Market Sentiment and Stock Performance

Cloudflare’s stock is known for its volatility, having experienced 22 price swings greater than 5% over the past year. Today’s decline suggests that while investors see the latest news as significant, it does not fundamentally alter their view of the company’s long-term prospects.

Just six days ago, Cloudflare’s shares dropped 9.9% as investors took profits after a sustained rally. That rally was driven by growing excitement around autonomous AI agents built on Cloudflare’s platform, which demonstrated the company’s strong position in the evolving AI landscape. This momentum showcased Cloudflare not only as a security provider but also as a critical infrastructure player for next-generation AI systems that require fast, globally distributed computing power.

Since the start of the year, Cloudflare’s stock has fallen 14.8%. Currently trading at $167.10 per share, it sits 34% below its 52-week high of $253.30 reached in October 2025. For perspective, an investor who purchased $1,000 of Cloudflare stock five years ago would now have an investment valued at $2,029.

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