The AI puzzle is coming together – and Snowflake is the key piece

UBS identified Snowflake as a potential beneficiary of the artificial intelligence trend.

The bank upgraded the rating for the cloud data storage company from “neutral” to “buy.” Analyst Karl Keirstead also raised his 12-month price target from $210 to $265, signaling a 27% upside potential compared to Tuesday’s market close.

Although Snowflake’s shares have gained 35% since the beginning of the year, Keirstead commented that “it’s not too late to take a more positive position.”

“We are becoming increasingly confident that we are only at the beginning — just a few quarters in — of a corporate investment cycle that could last for years and is focused on the data layer,” Keirstead wrote. “This is based on industry checks as well as the results from companies like Snowflake, Palantir, and Databricks.”

The optimism stems from signals from Snowflake’s customers and partners that their spending on data infrastructure has increased. In many cases, this growth is driven by the rising value of corporate data as a key factor in the performance of AI applications, the analyst explained.

“As Snowflake itself argues — and we agree — companies increasingly need ‘AI-ready’ data, which positions Snowflake, Palantir, and Databricks as major beneficiaries of the AI trend,” he added. “This is also evident in the efforts of SaaS companies like Salesforce, ServiceNow, SAP, and others to enter the data management software space.”

Meanwhile, the competition between Snowflake and Databricks appears more manageable than previously thought, as the overall market is growing fast enough to accommodate both players. Another advantage for Snowflake is its successful expansion of its data management portfolio, which allows it to capture a larger share of corporate data budgets.