Figma (FIG) stock experienced a significant selloff this week, dropping approximately 8% on Wednesday and extending losses on Thursday, after Google announced major updates to its AI-powered UI design platform, Stitch. The stock is now trading around $24.50, down roughly 80% from its post-IPO high of $142.92 and below its IPO price of $33 per share.
Google's announcement centered on a new concept called "vibe designing," which uses natural language prompts to generate polished UI designs and front-end code without starting from a wireframe. "When 'vibe designing' in Stitch, you can explore many ideas quickly leading to a higher quality outcome," Google stated. The tool now also supports voice input for real-time changes and added templates for SaaS dashboards, health apps, and entertainment tools—areas that directly overlap with Figma's core customer base.
The competitive threat is amplified by Stitch's deep integration with the Google ecosystem, including Google Docs, Drive, and Workspace. This integration significantly reduces switching costs for teams already using Google's productivity tools, posing a direct challenge to Figma's market position. Google's history of rapidly scaling products added to investor concerns, despite Stitch being in beta with no clear monetization timeline.
Figma's financials present a mixed picture. The company reported strong 2025 revenue of $1.06 billion, a 41% year-over-year increase, with a net dollar retention rate of 136%. However, net losses widened dramatically to $1.25 billion in 2025, up from $732 million in 2024, driven by rising stock-based compensation and operating expenses.
Market analysts are divided on the outlook. According to TipRanks, of 9 analysts covering Figma, 3 maintain a Buy rating while 6 recommend Hold, with an average price target of $40.25. Recent actions include RBC Capital assigning a Sector Perform rating ($31 target), Stifel maintaining Hold ($30 target), and Wells Fargo reiterating Overweight ($42 target). Technical indicators suggest some stabilization, with the Relative Strength Index (RSI) moving out of oversold territory.
Figma CEO Dylan Field addressed market volatility in a February interview, stating, "I think volatility is probably good at strengthening companies long-term." The company continues to invest in its own AI capabilities through partnerships with firms like Anthropic and Google itself.
