Figma's stock drops 11% in two days after Google releases 'vibe design' product

Figma's stock has taken a significant hit, dropping 11% over two days, amid growing concerns about competition from artificial intelligence. This downturn intensified following Google's recent beta launch of Stitch, an AI-driven design tool that allows users to create designs through simple prompts. Google has described Stitch as a "design agent" capable of providing immediate design feedback and responding to voice commands. While the service is currently free and its future availability remains uncertain, the announcement sent ripples through Wall Street, already wary of the implications of AI on existing software solutions. On Wednesday, Figma's shares fell by 8%, followed by an additional 3% drop on Thursday. The company's stock has plummeted approximately 35% this year, reflecting a broader downturn in the software sector. A spokesperson for Figma did not provide comments on the situation. Figma went public in July, positioning itself as a key player in the AI-enhanced design space. In a notable move, Adobe attempted to acquire Figma for $20 billion in 2023, though the deal fell through due to regulatory challenges. In the same time frame, Adobe’s shares have also experienced a decline of around 4%. If Google decides to monetize Stitch in the future, it could significantly alter the competitive landscape for design tools, potentially keeping users within its extensive ecosystem. Google boasts substantial financial resources and a robust distribution network, making it a formidable contender in the product design market. In a recent partnership, Google Cloud and Figma announced plans to integrate more of Google's generative AI capabilities into Figma's platform, with the Figma Make tool allowing users to generate designs using AI models from Anthropic and Google. The unfolding developments suggest a pivotal moment for both companies as they navigate the evolving landscape of AI in design.