- Figma shares dropped 8% on Wednesday.
- The updated Stitch packs several functionalities generally found in high-end design platforms such as Figma.
- Retail traders on Stocktwits remained ‘bearish’ on FIG amid recent weak stock performance.
Figma on Wednesday became the latest casualty of AI companies increasingly encroaching on the turf held by niche software firms. Shares of the company plunged 8%, its steepest fall in over a month, after Google updated its AI design tool, Stitch, with sophisticated capabilities.
Stitch Targets Figma’s Turn
Stitch, first launched in May last year as an experimental tool for designing UI elements for web and mobile apps, can now turn natural language prompts into high-fidelity UI designs, support voice edits, and build interactive prototypes.
The update makes it more friendly to users with little coding or design experience. Users can input business objectives or describe the desired user experiences to generate design concepts, removing the need to start on traditional wireframes.
Powered with an AI agent, Stitch can now track the entire project histories, convert static designs into clickable prototypes, and preview app flows – capabilities generally found in high-end design platforms such as Figma.
Stitch runs on Gemini models with generous free limits – 350 generations monthly in standard mode – and exports directly to Figma or code like React. Although only more testing would reveal overlaps with Figma, tech observers and investors largely viewed the updated Stitch tool as a threat to the company.
AI Rollout Hammers Niche Software Stocks
The drop in Figma stock echoes a familiar pattern. Over the past two months, shares of major software firms such as Intuit and Salesforce, along with several cybersecurity names, have declined instantly following Anthropic’s rollout of new capabilities in its Claude “Cowork” agentic AI platform that would overlap with core use cases served by these companies.
The development comes at a challenging time for Figma, which debuted on the New York Stock Exchange in July, a year after its merger with Adobe was shelved due to regulatory hurdles.
The stock had rallied a staggering 250% on its opening day but has since declined sharply. It’s currently down 23% from its IPO price. On Stocktwits, retail sentiment for FIG has tracked in the ‘bearish’ zone since the start of this month.
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