Snowflake’s shares are doing that thing again—soaring like a rocket that just remembered it’s supposed to go to space. Thursday morning, the stock jumped double digits after the company’s latest earnings report. Analysts are tripping over themselves to raise price targets, and the usual chorus is singing the same tune: artificial intelligence is going to make Snowflake rain money.
Maybe. But let’s not get ahead of ourselves.
The cloud-data company reported revenue that beat expectations, and management talked up the AI-driven demand for its platform. Chief Executive Sridhar Ramaswamy, who took the helm earlier this year, has been pushing Snowflake as the place where companies bring their data to feed the AI beast. It’s a compelling pitch. Every business on earth is desperate to figure out how to use AI without blowing up their budgets or their reputations, and they need somewhere to store, organize, and query all that data. Snowflake wants to be that somewhere.
Wall Street is buying it. On Thursday, at least a dozen analysts raised their price targets, with some going so far as to call Snowflake a “top pick” in the software space. The stock was up more than 15% in morning trading, adding tens of billions to the company’s market value. If you bought at the open, you’re feeling pretty smart right now.
But here’s the thing about stock prices: they’re not just about today. They’re about tomorrow, and the next year, and the next decade. And Snowflake’s valuation already assumes a very rosy tomorrow.
The company is still growing fast—revenue was up 32% year over year in the latest quarter. That’s nothing to sneeze at. But the growth rate has been slowing, and the stock trades at a nosebleed multiple of roughly 150 times forward earnings. That’s not a bet on Snowflake’s current business; it’s a bet on a future where AI workloads flood into the platform and never stop.
Maybe that future arrives. The AI wave is real, and companies are spending billions on computing power and data infrastructure. Snowflake is well-positioned to catch some of that wave. Its platform is built to handle the kind of massive, unstructured data that AI models need to train and run. And Ramaswamy, a former Google ad genius, knows a thing or two about scaling technology.
The AI premium is real, but so is the risk
There’s no denying that AI has become the magic word on Wall Street. Any company that can credibly claim to be part of the AI supply chain gets a premium valuation. Snowflake is no exception. In its earnings call, executives mentioned “AI” more times than a tech conference keynote. They talked about new features like Cortex, which lets customers build AI applications without being data scientists, and they hinted at a pipeline of “AI deals” that are bigger and juicier than the traditional ones.
It’s a good story. But it’s a story we’ve heard before. Remember when every company was going to be “blockchain-enabled”? Or when the “metaverse” was going to change everything? Hype cycles come and go, and the companies that survive them are the ones that actually deliver results, not just promises.
Snowflake does have results. Revenue is growing, and the company is generating strong free cash flow. It’s not a money-losing startup anymore. But it’s also not cheap. At the current price, you’re paying for perfection. If Snowflake stumbles—if growth slows more than expected, if AI workloads take longer to materialize, if competition from Databricks and others starts to bite—the stock has a long way to fall.
And competition is fierce. Databricks, its main rival, is growing just as fast and has its own AI story. Plus, the big cloud providers—Amazon, Microsoft, Google—are all pushing their own data services. Snowflake has carved out a niche, but it’s a niche that others are eyeing greedily.
The real question: Can Snowflake keep up the pace?
For now, the bulls are in charge. Analysts like Rishi Jaluria of RBC Capital Markets called the quarter “a clear sign that Snowflake is executing well in the AI era.” Others echoed that sentiment, raising their price targets to as high as $200 a share, implying another 10% upside from current levels.
But there are skeptics too, and they ask a simple question: If Snowflake is such a great AI play, why did its growth decelerate over the past few quarters? In the most recent quarter, revenue grew 32%, down from 35% the previous quarter and 38% the one before that. That’s a trend, not a blip. The company says it’s because of “deal timing” and “macro headwinds,” but investors have heard that before from companies that later cratered.
There’s also the question of profitability. Snowflake has been spending heavily on sales and marketing to fuel its growth, and that’s eating into margins. It’s not profitable on a GAAP basis, and it won’t be for a while. That’s fine for a growth stock, but it makes the stock sensitive to any hiccup in the growth narrative.
The truth is, we’re in the middle of one of the biggest technology shifts in decades, and nobody knows exactly how it will play out. AI could be the next internet, creating massive value for companies like Snowflake. Or it could be the next dot-com bubble, with valuations based on fantasy rather than fundamentals.
I’m not saying Snowflake is a bubble. I’m saying it’s priced like one. The company has a real product, real customers, and a real strategy. But so did Cisco in 2000, and its stock took 15 years to get back to its peak.
The verdict: A great company, but a risky stock
If you’re a long-term investor who believes in the AI revolution and wants exposure to the data infrastructure that will power it, Snowflake is a reasonable bet. Just don’t expect the stock to go up in a straight line. There will be volatility, and you need to have the stomach for it.
If you’re a trader looking for a quick pop, you might be too late. The easy money on this earnings surprise has likely already been made. But if the AI trend continues, there could be more runs ahead.
Snowflake’s stock is surging today because Wall Street is betting that AI will be the gift that keeps on giving. They might be right. But remember, when everyone is cheering, it’s often time to check your seatbelt.
The next few quarters will be telling. If Snowflake can show that AI deals are translating into sustained revenue growth, the naysayers will have to eat crow. If not, this surge could be just another dead-cat bounce in a long, slow descent.
Either way, it’s going to be a wild ride.
