Snowflake (New York Stock Exchange: Snow) The stock has just come out of a nasty snowfall following recent quarterly results that matched a surprising CEO change and disappointing guidance. SNOW stock has lost approximately 33% of its value since its 52-week high of $237.72 per share. With a number of AI innovations announced recently (and likely more to come), highly undervalued artificial intelligence (AI) stocks appear to be oversold right now.
No doubt, Snowflake's last quarter was a lot for investors to digest, perhaps too much to digest. The softer guidance was a bit of a punishment, especially considering how high the multiples have been going into the quarter. That said, I think many investors are underestimating new CEO Sridhar Ramaswamy's abilities.
In a previous article covering Snowflake's post-earnings story, I urged investors to put their doubts to rest, considering that Snowflake's new CEO brings expertise, especially in AI, from his time at Alphabet (NASDAQ:Google) Google and Niva.
Given the chance, Snowflake's new leader, a scientist and visionary who probably knows more about AI than most other senior executives, would be a worthy successor as Snowflake pivots toward the era of generative AI. I would like to say that it might be. I have no hesitation in saying he remains bullish on SNOW stock while it remains below $160 per share following the announcement of new AI products and newly lowered expectations.
Snowflake's Arctic AI model could be a huge deal for companies
With the recent release of Snowflake's new open source enterprise large-scale language model (LLM) Arctic, boasting a whopping 480 billion parameters, Snowflake has officially jumped on board the LLM train. It will also be interesting to see how technologies “optimized for complex enterprise workloads” lead to growth in the coming years.
Of course, it will be a while before Snowflake's latest AI innovations cause the stock to rise again. However, following the recent decline in SNOW stock, expectations appear to be modest enough that a surprise win could be in the offing. Additionally, I think the news about the North Pole has been pretty muted, especially given the potential advantages over other enterprise LLMs on the market.
In fact, it looks like 2024 won't be as interesting for AI model launches and announcements as 2023. New chatbots seem to be released on a regular basis, and some may see LLM as becoming commoditized. From OpenAI to Anthropic to the Magnificent Seven companies, it seems like every company has a piece of the AI pie right now.
As the number of open source and proprietary AI models increases over time, competition is likely to increase significantly. That said, I don't think his LLM is commoditized. It's not because there are so many ways one model can differentiate itself from another. In the end, it probably doesn't matter how much is on offer. Crowds will flock to the model that best suits their needs, and it's not just about power or number of parameters.
More efficient, custom-tuned AI models can outperform raw power. In that regard, I see Snowflake as potentially bringing noise to AI. According to reports, Snowflake's Arctic is more cost-effective for training than its competitors, requiring one-eighth of the cost compared to comparable rivals. This is a critical efficiency that many investors may be sleeping on.
Monetization through AI is important in the early stages
Less than two years after ChatGPT took the world by storm, many of us are probably tired of hearing about the latest LLM specifications (parameters, benchmarks, etc.). We want to know how these innovations can drive revenue and growth. Until it is clear how these new models are going to generate revenue (financial estimates would be nice), it may be difficult to raise goals based solely on AI model launches. not.
Either way, it may be a mistake to discount the growth potential of a new LLM like Arctic, given its superiority over its competitors.
In the next phase of the AI boom, I predict that efficiency and personalization will be the biggest differentiators among AI warfighters. For now, both metrics appear to be declining, as Snowflake aims to help enterprise customers harness the power of data.
Arctic LLM isn't the only thing that could help put Snowflake for AI in a good position. The company has no shortage of AI features to make users' lives easier. From Cortex Services (for managing and improving software development processes) to Document AI (for transforming unstructured document data into structured data), Snowflake's commitment to AI builds a moat around its ecosystem It is clear that it can be done.
Is SNOW stock a buy, according to analysts?
TipRanks rates the SNOW stock as a Moderate Buy. Of the 37 analyst ratings, there are 24 buy recommendations, 11 hold recommendations, and 2 sell recommendations. SNOW's average price target is $211.26, suggesting 32.6% upside potential. Analyst price targets are as low as $125.00 per share and as high as $260.00 per share.
SNOW stock conclusion
In fact, there is a great deal of uncertainty about how much bacon new AI will be able to capture over the years. And for a company like Snowflake with a volatile usage-based revenue recognition model, it's far better to err on the side of caution when it comes to estimates, especially when facing significant economic uncertainty. I would argue that it is good for.
With a strong and growing AI presence (Arctic and other AI innovations) and an “AI man” now running the show, Snowflake's best days (at least for publicly traded companies) may still be behind it. I think it's ahead.
disclosure
