Local tech stocks got torched by fears of AI. Now some hedge funds say AI could be the answer.
Fresh off a pressure campaign it started last year against Tripadvisor, Starboard’s eight-page letter to Dynatrace chief executive Rick McConnell and his board initially defended the company, which has seen its stock price drop 18 percent this year amid the AI software sell-off.
Dynatrace helps customers monitor how apps and websites are behaving, and AI-coded apps may need even more oversight, Starboard managing member Peter Feld noted in the letter. “It appears the market has ascribed significant near-term risk to Dynatrace,” Feld wrote. “In fact, enterprise adoption of AI should ultimately result in accelerating revenue growth for Dynatrace.”
But Feld also criticized Dynatrace for failing to improve its profitability over the past five years even as its revenue tripled to over $2 billion. The answer, at least in part, could be to use more AI. “Recent advances in AI tools should be able to meaningfully improve productivity and lower costs across the organization,” Feld wrote.
Dynatrace shares gained 2 percent in midday trading on Tuesday after Starboard released its letter. The company did not immediately respond to a request for comment.
In Tuesday’s letter, Feld said Starboard looked forward to working with Dynatrace’s current management and board. But if the fund is not satisfied with the company’s efforts, it could get more aggressive and mount a campaign to unseat members of the board, as it did at design software firm Autodesk last year.
Starboard’s campaign against Dynatrace follows the fund’s efforts to pressure Tripadvisor to cut costs and possibly split up or sell the Needham-based travel company. Last month, the company agreed to support adding four Starboard-backed nominees to its board. Tripadvisor’s stock price, which was sinking even before the AI sell-off, has lost about 25 percent this year.
North of Boston, payments tech company WEX in Portland, Maine, is also engaged in a heated battle with an activist hedge fund.
Impactive Capital in New York, which owns 4.9 percent of WEX, wants the company to improve profitability and spin off its corporate benefits unit. The fund also argued that AI could boost WEX’s business and help cut costs. “AI should drive companies to adopt emerging payment technologies faster and payment companies to expand their margins,” the fund wrote in an April 14 presentation to shareholders.
At next week’s annual meeting, the fund is asking fellow shareholders to vote out chief executive Melissa Smith and two other board members and replace them with Impactive cofounder Lauren Taylor Wolfe and two of her allies.
WEX has fought back, pointing to record revenue of $2.7 billion last year and improving net income. “WEX is more focused, more resilient and better positioned for growth than ever before,” the company’s board said in a letter to shareholders last week. “Across the company, we are leveraging AI to accelerate innovation, improve efficiency and enhance our customer value proposition,” the board added.
Boston cybersecurity company Rapid7 also dealt with an activist investor over the past few years. And if AI fears continue to pound software company stocks, expect even more action in 2026.
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🩺 Boston-basedAcuityMD, making software to help medical tech companies with sales, raised$80 millionin a deal led by StepStone Group and including Benchmark, Redpoint Ventures, ICONIQ, and Atreides Management.
⚛︎ Quantum computing software companyZapata Quantumin Boston raised$15 millionin a deal led by Triatomic Capital.
⚕️Boston-basedAlmanac Health, developing medical AI software, raised$10 millionin a deal led by F-Prime and including General Catalyst and Lightspeed Venture Partners.
🔋 Battery software firmElectra Vehiclesin Boston isgoing publicby merging with a special purpose acquisition company called Iron Horse Acquisition II Corp.
🏢 Insurance tech firmOpenlyin Boston received anunspecified investmentin a deal led by Eden Global Partners, Advance Venture Partners, and Gradient.
💵 Benefits software firmAlegeus Technologiesin Boston is beingacquiredby Minnesota-based health insurance giant UnitedHealth Group. Terms of the deal were not disclosed.
👾 Cybersecurity companyIOvationsin Burlington wasacquiredby Texas-based Alchemy Technology Group. Terms of the deal were not disclosed.
✨ Optical tech firmOptikosin Wakefield wasacquiredby private equity firm Artemis. Terms of the deal were not disclosed.
Cybersecurity company Legit Security in Boston hiredTamar Nulmanas vice president of human resources andOmri Arnonas head of engineering. Nulman previously was vice president of HR at MyHeritage. Arnon worked at SentinelOne.
Battery tech company Factorial in Billerica addedDieter Zetsche, former chair of Daimler AG and head of Mercedes-Benz, to its board of directors.
Battery tech company SES AI in Woburn saidYi (Ray) Liuhas replaced Jing Nealis as chief financial officer. Liu previously was North America chief risk and control officer at Adyen.
Data analysis software firm AtScale in Boston hiredMark Palmeras chief marketing and strategy officer. Palmer previously was chief executive of StreamBase and chief product officer at TIBCO.
What We’re Reading
Data centers are expensive, unpopular — and could be a tipping point in the midterms (NPR)
The man who is paying to see the future (Semafor)
Who Asked For This? (Cal Newport)
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Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him @ampressman.