Snowflake's AI-driven data momentum justifies Buy rating: UBS

UBS is telling clients that artificial intelligence is translating into real, growing spend on Snowflake, and the bank remains Buy-rated on the stock heading into its fiscal second-quarter results on September 2.

The bank's analysts spoke with seven enterprise partners and customers to gauge demand trends, adoption of Snowflake's Cortex Code and Coco tools, and the risk that large language models could eat into spending on established data software vendors.

The checks came back strong, according to UBS, with customers and partners largely expecting their Snowflake spend to accelerate, helped by continued Coco adoption.

Companies are increasingly focused on their data layer as new AI applications and agents need access to corporate data, UBS said, a dynamic that is making Snowflake, along with Databricks, Microsoft and others, more essential to enterprise infrastructure.

On competition, UBS said Databricks came up most often as the company taking share, with Microsoft also mentioned.

UBS also flagged a growing push among enterprises to better operationalize their data with AI models to improve returns, which typically requires a data ontology layer such as a semantic layer or knowledge graph.

The bank called this a direct positive for Palantir.

One investor worry UBS tested directly: that frontier AI models are getting good enough at data tasks that companies could bypass data software vendors altogether and use the models on their own.

UBS said its checks found little evidence of this happening, concluding that very few enterprises are using LLMs' data capabilities in a way that is cutting into spending on Snowflake, Palantir or Databricks.

Still, UBS acknowledged the setup into the print is not simple.

Investors are pr...