Snowflake leaps as AI investment surge supports data group earnings

Snowflake, the tech group group that sits at the intersection between AI chips and data storage, topped Street earnings forecasts thanks in part to a developing partnership with Nvidia.

Aug 24, 2023 - 18:30

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Snowflake leaps as AI investment surge supports data group earnings

Snowflake Inc. (SNOW) - Get Free Report shares moved firmly higher in pre-market trading after it posted better-than-expected second quarter earnings powered in part by AI-linked demand for its cloud-based data storage and management tools.

Snowflake, who's Data Cloud business includes customers such as BlackRock (BLK) - Get Free Report FactSet and Zillow (ZG) - Get Free Report, posted second quarter revenues of $674 million, a 36% increase from last year that topped Street forecasts. The Bozeman, Montana-based tech group also said it expects current quarter revenues in the region of $670 million to $675 million.

Snowflake is also leveraging partnership it unveiled earlier this spring with Nvidia (NVDA) - Get Free Report, the market leader in AI chipmaking, to help a range of companies use their proprietary data to build and store AI models.

"Snowflake as the global epicenter of trusted enterprise data is well positioned to enable the growing interest in AI/ML," said CEO Frank Slootman. "Enterprises and institutions alike are increasingly aware they cannot have an AI strategy without a data strategy.”

"We now have a presence with 639 Global 2000 customers. AI reaches beyond enterprise boundaries," he added. "Models need external data to answer challenging questions. Data sharing makes Snowflake uniquely positioned to enable AI workloads."

Snowflake shares were marked 4% higher in pre-market trading to indicate an opening bell price of $161.88 each, a move that would nudge the stock's year-to-date advance to around 12.8%.

"While Snowflake’s challenges include shifting consumption dynamics, the macroeconomic impact on bookings, the shortages of GPUs from Nvidia to train large language models, and competition from Databricks for data scientists' attention, we continue to like this story," said JMP Securities analyst Patrick Walravens, who carries an 'outperform' rating with a $200 price target on Snowflake stock.

"Snowflake has 7 new products coming to market that should drive consumption and revenue within the next year that should further address the needs of data scientists," he added.