Snowflake should emerge as a long-term AI winner despite a string of short-term snowstorms, Wall Street analysts think. Cloud stock fell more than 16% on Thursday after the company shared product revenue guidance that fell short of consensus expectations and results that pointed to slowing growth. Wolfe Research downgraded Snowflake to outperform from outperform, citing glaring difficulties. Even with these headwinds, many analysts remain positive about Snowflake’s long-term trajectory, seeing an acquisition and cloud transition as two catalysts for the stock. SNOW YTD mountain Snowflake shares since the beginning of the year “We view SNOW as one of the best positioned stories in infrastructure to benefit from the generative benefits of AI,” Jefferies analyst Brent Thill wrote in a May note to clients . He has a buy rating on Snowflake. He sees the acquisition of web search startup Neeva as another lead that allows Snowflake to capitalize on the swarm of AI workloads moving to the cloud. Neeva’s AI software that combines search with large language patterns is key to this thesis and should complement Snowflake’s goal of enabling customers to integrate ChatGPT and chatbots into their platforms to find information while maintaining privacy. The purchase should also increase Snowflake’s non-technical user base and improve its conversational and research skills, Piper Sandler’s Brent Bracelin said, reiterating its overweight rating. “AI workloads often involve processing web-scale amounts of unstructured data,” wrote Raymond James analyst Simon Leopold, who has a top rating on Snowflake. “We are optimistic about the incremental growth potential for Snowflake, although there is substantial uncertainty about the eventual size of the opportunity.” Snowflake’s Snowpark, which allows developers to code in their preferred language, is also central to its AI reach. About 30 percent of customers used the platform on a weekly basis, with consumption improving 70 percent quarter-over-quarter, CEO Frank Slootman said on the company’s latest earnings call. Analysts, including Goldman Sachs’ Kash Rangan, are eagerly awaiting the Snowflake Summit conference in Las Vegas this month for more leads on AI initiatives and advances. “We expect Snowflake Summit… to be a key catalyst for the stock as Snowflake updates LT’s financial goals and solidifies its AI product roadmap,” Rangan wrote. It has a buy rating on the stock. Deutsche Bank’s Brad Zelnick said in a recent note that AI, among other developments, should drive customer stickiness and improve use cases. “We reiterate our argument that Snowflake is in the sweet spot of two of the most important secular trends of this decade: data-driven decision-making (including artificial intelligence) and public cloud adoption,” he said, maintaining its buy valuation and $170 price target reflecting just a 3% upside from Wednesday’s close. A Dark Future However, not everyone seems optimistic about the potential of Snowflake’s AI. Redburn called the cloud company a “probable” underdog in a May note to clients. The firm said the stock should not be seen as a buying opportunity, citing its “inflated” and steep multiple valuation compared to companies like Palo Alto Networks. “Hyperscalers have a clear path to drive re-acceleration through ML/AI applications,” analyst Alex Haissl wrote in a May note. “However, for Snowflake, the deceleration and dim outlook stems in part from emerging structural headwinds, in our view.” SNOW 1 Million Mountain Snowflake Shares in the Last Month Some of these issues stem from declining spending among existing customers and challenges attracting new customers with deeper pockets. Haissl sees more growth opportunities for hyperscalers than Snowflake. While he sees Snowflake as a top-notch UI platform in a growing market, its status as a data warehouse creates limitations. “At its essence, Snowflake is a data warehouse, a great but more mature technology with limited advantages but also disadvantages from ML/AI,” said Haissl. CNBC’s Michael Bloom contributed to the reporting
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