We recently published a list of the 8 best long-term tech stocks to invest in now. In this article, we’ll take a look at how Snowflake Inc. (NYSE:SNOW) stacks up against other tech stocks that are great long-term investments.
After a dire macroeconomic situation in 2022, the technology sector came to the rescue of the market in 2023. Investments in advanced technologies such as generative AI continue to show great potential for future business growth.
According to CNBC’s Q3 CFO Council Survey, 48% of CFOs said tech industry growth will outpace all other sectors in the next six months. Additionally, Leian Mitrione, investment management partner at the Curran Family Office, emphasized in an interview with CNBC on September 23 that the technology sector is a big beneficiary of the recent Fed rate cuts. Lower interest rates are good for technology companies, which often thrive in this environment.
The ongoing AI theme is also a key driver of the strong performance of technology companies. He further notes that while mega-cap tech stocks have traditionally been seen as a safe haven during times of economic uncertainty, the changing interest rate environment is broadening the focus to smaller, economically sensitive sectors. He said it was possible. Nevertheless, the strong momentum for AI-powered technologies is likely to continue for some time.
Global technology spending in 2024 is optimistic
High interest rates, economic concerns, and geopolitical issues slowed global technology spending in 2023, according to Deloitte’s 2024 Technology Outlook. However, there is growing optimism in 2024, with global IT spending growth expected to be between 5.7% and 8%. Growth areas include investments in software, IT services, and AI, with AI spending potentially reaching $200 billion by 2025. Cloud computing and cybersecurity are also expected to be in strong demand.
The report says that although Gen AI is gaining momentum, it is expected to grow slowly in 2024 and grow even more in 2025 as it is integrated into software and business processes to improve productivity and efficiency. states that it has been done. Demand for AI hardware is expected to exceed $50 billion next year, but businesses continue to explore AI monetization strategies.
Improve energy efficiency with AI
Furthermore, the growing influence of large technology companies and increased reliance on AI are significantly increasing energy demand. We discussed this in our article on 13 Big Tech Stocks to Buy Now. Below is an excerpt from the article.
“With the rise of big tech companies and the growing use of AI, a notable recent trend that people have started to notice is an increase in the demand for electricity. The owner recently went so far as to purchase a nuclear-powered data center for $650 million.
The main driver of this increased demand is the need for AI development. Many energy-conscious investors may see this new trend as a red flag for big tech companies. However, Jensen Huang points out that AI requires a lot of energy to train, but once developed and trained, it can also help save energy. In particular, he said that this development will make AI so advanced that it will ultimately provide solutions that will change the way energy is used and make businesses infinitely more energy efficient. ”
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Concerns about the power needed to power AI are justified, but industry pioneers like Nvidia CEO Jensen Huang say the technology itself can help solve that problem.
our methodology
In this article, we use the Finviz Stock Screener to identify 27 tech stocks with market caps above $10 billion, analyst ratings of Buy or Buy-equivalent, and average price targets for upside of more than 20%. I have identified it. As of September 26, we narrowed the list down to the eight stocks with the greatest increase in average analyst price target. Tech stocks that perform well over the long term are listed in descending order of increase in average analyst price target.
We also mentioned hedge fund sentiment for each stock, pulled from the Insider Monkey database of over 900 elite hedge funds.
Why are we interested in stocks that hedge funds invest in? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
Is Snowflake Inc. (NYSE:SNOW) the best long-term tech stock to invest in now?
Is Snowflake Inc. (NYSE:SNOW) the best long-term tech stock to invest in now?
Snowflake Co., Ltd. (NYSE:SNOW)
Analyst average price target upside: 51.12%
Number of hedge fund holders: 69 people
Snowflake, Inc. (NYSE:SNOW), one of the best long-term tech stocks, offers a cloud-based data platform that has revolutionized the way organizations process and analyze data. Advanced data warehousing solutions allow businesses to efficiently store, manage, and share vast amounts of information in real time.
The core of the company’s offering is a cloud data platform that features a unique architecture that separates storage from computing resources. This design allows customers to adjust resource allocation independently, avoiding the large hardware investments typically associated with traditional data management systems.
The company’s range of services includes data integration, sharing, and advanced analytics, serving a variety of industries including healthcare, finance, and retail.
Businesses are increasingly relying on data to drive decision-making and are well-positioned to take advantage of this growing demand. The stock has a consensus Buy rating from 46 analysts, with an average price target of $170.00 representing a 51.12% upside from current levels as of September 26th.
The rapid growth in AI usage has further increased the need for robust data solutions, and the company’s infrastructure is critical to supporting these AI workloads. To enhance its capabilities, we invested in graphics processing units (GPUs), which are critical to managing AI’s heavy computational demands.
These investments are impacting profit margins due to the high costs associated with GPUs, but the company’s leadership is focused on ensuring spending matches revenue growth.
At a recent conference, CFO Mike Scarpelli outlined a cautious approach to future GPU purchases, emphasizing the importance of revenue supporting these investments. “We’re not going to buy any more GPUs until we have the revenue to support it,” he said.
His comments suggest a focus on a balance between growth and profitability that ultimately benefits shareholders. Snowflake (NYSE:SNOW)’s long-term outlook is very promising, with management saying the company’s addressable market was valued at $153 billion last year and could reach $342 billion by 2028. shows the prediction.
Baron Fifth Avenue Growth Fund said the following about Snowflake Inc. (NYSE:SNOW) in its Q2 2024 investor letter:
“Snowflake Inc. (NYSE:SNOW) is a leading cloud data platform used primarily for data analytics. Recently announced CEO change, investment cycle due to spending on AI, cybersecurity incidents, rapidly changing competition The stock fell 16.4% as investors assessed the environmental impact.With GenAI dominating the public discussion, Snowflake’s place in the future data stack has come under scrutiny from both investors and customers. We believe our newly appointed CEO, Sridhar Ramaswamy, will help Databricks and other leading companies move more efficiently towards an AI-first world. While our competitors are performing well, we believe Snowflake’s brand, existing customer base, and accelerating product innovation should allow us to continue gaining share in this relatively large and strategic market. Management continues to describe strong demand trends for core data analytics, evidenced by relatively healthy growth rates among existing customers and new go-to-market initiatives. Longer term, we remain excited about Snowflake’s strategic opportunity as a data platform for our customers.”
Overall, SNOW ranks 2nd on our list of best tech stocks for long-term investing. While we see the potential of SNOW as an investment, we believe AI stocks have a better chance of delivering and achieving higher returns. shorter period. If you’re looking for AI stocks that are more promising than SNOW but are trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: $30 trillion opportunity: Morgan Stanley’s 15 best humanoid robot stocks to buy and Jim Cramer says NVIDIA has ‘become a wasteland.’
Disclosure: None. This article was originally published on Insider Monkey.
