Figma Stock Fell on AI Fears. AI May Be Its Rerating Trigger

Figma shares fell sharply last week. Investors priced in the threat of generative AI to the design-tools market, and the stock dropped with a handful of other software names.

The sell-off reflected a reading of Figma that is too narrow, several fund managers said. The company started as a browser-based design tool. It now handles prototyping and developer handoff, and it has added AI-powered features including smart selection and auto-layout. It has integrated machine learning for years.

The market is treating Figma as a design-software company facing disruption. Some analysts see it differently. They have upgraded the stock, saying the same AI that caused the sell-off could be the catalyst for a higher multiple. Figma’s platform, with its collaborative layer and plugin ecosystem, may become the distribution layer for AI design tools rather than a victim of them.

The timeline for the rerating hinges on product releases. Figma plans to unveil new AI features at its annual Config conference in June. The lineup includes a design-to-code feature and an AI assistant that generates UI components from natural language prompts. A strong showing could reset the narrative.

What would confirm the upside? Sustained user growth in the AI features and evidence that the tools drive higher engagement and monetization. The bear case: competitors like Canva match the features faster. Another risk is that Figma’s own AI integration alienates the community, pushing designers to platforms that treat AI as an enhancement rather than a replacement.

The stock’s valuation has compressed since the sell-off, leaving room if the AI narrative shifts, the fund managers said. Figma’s Config conference is set for June 10.