Chalk up one for team software. Snowflake is defying fears of disruption by artificial intelligence, which might give some hope to peers of the data-warehousing company. But investors should be wary of rushing back into the sector as a whole.
Snowflake stock surged after reporting earnings that beat expectations. Importantly, the company can make the argument AI is actually boosting demand for its products. In fact, it's so confident that it plans to pay $6 billion for access to Amazon's processors to power its AI products.
But while Snowflake shows there can be AI winners in software, it's still a tough sector to trade. Just look at customer-relationship management giant Salesforce or cybersecurity company Zscaler, both of which delivered underwhelming figures despite making multiple AI-related acquisitions in the hope of riding the trend. Sharp post-earnings moves indicate the market is struggling to price software stocks.
The big question is why risk investing in software companies when the AI hardware trade looks so much easier. Snowflake's gains are impressive but pale in comparison with the huge rises in chip stocks such as Micron Technology or Intel. In fact, of the best-performing S&P 500 stocks for this year through Wednesday's close, the top 20 are all hardware or infrastructure companies. The top software company is Snowflake peer Datadog, coming in at 24.
The gap won't last forever. At some point the capital-spending boom will slow and the cycle will turn for hardware companies, while the long-term winners in software will emerge. But with AI companies OpenAI and Anthropic releasing products at a breakneck pace and still yet to come onto the public market, it would be a brave investor willing to pile in to software just yet.
One swallow doesn't make a summer, and one Snowflake beat doesn't mark the end of the software winter.
-- Adam Clark
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Snowflake Propelled by Amazon Ties, Earnings and Outlook Beat
Snowflake expanded ties to Amazon Web Services with a $6 billion deal that will make it one of the cloud giant's biggest customers for its general-purpose Graviton processor chips used inside AWS data centers. The popularity of AI agents has boosted the demand for such central processing unit chips.
-- The news accompanied a stronger-than-expected earnings report and outlook
from Snowflake, a cloud-based software maker. Snowflake sees fiscal year
2027 product revenue of $5.8 billion, up from prior guidance and up 31%
from fiscal year 2026. CEO Sridhar Ramaswamy said AI is a powerful
tailwind.
-- For the quarter that ended on April 30, Snowflake reported adjusted
earnings of 39 cents a share and a 33% jump in revenue to $1.39 billion.
Looking ahead, Snowflake forecasts second-quarter product revenue coming
in between $1.415 billion and $1.42 billion, also above expectations.
-- The multiyear infrastructure commitment to AWS reflects the accelerating
enterprise demand for AI and data workloads running on AWS, it said. Many
investors see AI agents reshaping the business. Agents are software that
can use AI to complete complex tasks from a simple prompt.
-- Snowflake said it has 779 customers spending more than $1 million on a
trailing 12-month basis, and 46 of them crossed that threshold in the
first quarter versus 26 a year ago. The momentum is the reason it raised
its full-year product revenue guidance.
What's Next: Like human users, agents are going to require access to cleaned and properly governed data, which could raise consumption as workloads shift from people to machines. Snowflake is also offering its own AI software, including agents.
-- Adam Levine and Kit Norton
Nebius Attracts Huge Backing From AI Investor Aschenbrenner
The artificial-intelligence boom has given all sorts of stocks a lift -- including so-called neoclouds, which provide additional computing capacity. Nebius is in that bracket and has just got significant backing from a prominent AI investor.
-- Leopold Aschenbrenner's Situational Awareness fund disclosed it owns
12.41 million Class A shares of Nebius yesterday, worth around $2.86
billion at Wednesday's closing price of $208.37. That represents a 5.6%
stake in the cloud-computing company.
-- Aschenbrenner briefly worked as a researcher at ChatGPT-developer OpenAI
before turning to stock-picking, with a focus on companies that stand to
benefit from the rise of AI. He named his firm Situational Awareness
after the title of a lengthy essay he published in June 2024 arguing that
effectively superhuman artificial intelligence could arrive as soon as
2027.
-- Nebius shares were already up 150% this year so far through Wednesday's
close, emerging as the hottest of the neoclouds. Eleven of the 16
analysts covering the stock rate it Buy, and Wall Street's average price
target of just over $190 implies 16% upside.
-- The Situational Awareness fund also has significant holdings in neoclouds
CoreWeave and IREN.
What's Next: For all the excitement about the AI boom, getting data centers running could still be a challenge. There's a shortage of contractors with electrical expertise, which has created a significant bottleneck.
-- Adam Clark and George Glover
Space Stocks Have Taken Off. These Could Be Hidden Ones.
Space stocks are frothy ahead of SpaceX's widely anticipated initial public offering, and the IPO buzz and SpaceX itself have shown investors what's possible in space with low-cost rocket technology, but not all stocks are moving higher, yet. Investors should know who could be affected by the SpaceX halo effect.
-- Elon Musk aims to raise more than $75 billion for his rocket company, for
a valuation of $2 trillion. SpaceX runs Starlink, a space-based broadband
business that generates billions of dollars in annual operating profit
annually. SpaceX is also pushing deeper into AI and space-based data
centers.
-- Pure-play space stocks, including Rocket Lab and AST SpaceMobile, plus
Planet Labs, Firefly Aerospace, Intuitive Machines, Redwire, York Space
Systems, and Voyager Technologies, trade for an average of roughly 75
times trailing sales. None is profitable yet.
-- Other companies with significant space businesses could also take off,
including Airbus, Boeing, Safran, and Lockheed Martin. Airbus and Safran
own half of Ariane Group, which provides space access for Europe. Boeing
and Lockheed own half of ULA, which gave Americans access to space.
-- European nations are spending more on military space projects, says Micah
Walter-Range, founder of Space Investment Services. Airbus, along with
Leonardo SpA and Thales, is likely to benefit from any European Space
Agency collaboration with America on moon projects
What's Next: Alphabet might own a $100 billion stake in SpaceX, a consequence of its 2015 investment in the rocket company. Exactly what's happened to those shares isn't known. Alphabet's holding wasn't reported in SpaceX's IPO registration document, which only means Alphabet doesn't own 5% of the company.
-- Al Root
Why Consumers Feel Worse About the Economy Than Before
Key indicators point to a resilient economy but you wouldn't suspect that from consumer sentiment, which fell to a record low this month in the University of Michigan's monthly survey. The disconnect between real and predicted levels of consumer sentiment -- the "vibecession" -- shows that traditional data isn't capturing real economic perspectives.
-- Economist Paul Krugman has said that the economy is "objectively not bad
enough to justify the worst consumer sentiment in history." For example,
gross domestic product growth is up, unemployment is low, and the stock
market keeps hitting new highs.
-- Jared Bernstein and Daniel Posthumus wrote for the Stanford Institute for
Economic Policy Research that traditional economic indicators overlook
what they call "price-level shocks" between what people expected and what
things actually cost. That helps explain the "vibe gap."
-- While economists focus on the inflation rate, consumers look at the
prices themselves: How much rent, groceries, or electricity costs now
compared with what they remember paying a few years ago. People told
Bernstein: "I remember what my old prices were, and damn it -- I want
them back."
-- Housing costs have outpaced wage growth in nearly every major metro area
since 2019, to an average $2,189 a month in 2024. Grocery prices rose
roughly 25% between 2019 and 2023, to $847 a month. Transportation costs
increased to $1,110 a month.
What's Next: Lower-income Americans, people without college degrees, and those who don't own stocks spend more of their income on groceries and gasoline than wealthier Americans. They expressed some of the steepest drops in consumer sentiment, said Joanne Hsu, director of the Michigan sentiment survey.
-- Elijah Nicholson-Messmer and Janet H. Cho
Exxon Mobil Is Latest to Pack Up and Move to Texas
Exxon Mobil, facing no dissent from shareholders, won a vote to reincorporate in Texas, where the legal landscape is considered more corporate-friendly than other states. It's just the latest company to move to the Lone Star State, where business courts have different rules regarding issues like fiduciary duties of directors.
-- Exxon has been in New Jersey, a vestige of its past as Standard Oil. It says the Texas environment is more conducive to how it operates. CEO Darren Woods pointed out to shareholders that Among the things that Texans apparently respect is the importance of "hydrocarbon-based products." -- Texas has worked hard to attract more businesses, and compete with states like Delaware and New Jersey as a home for corporate and legal affairs. It established new business courts in 2023 with judges appointed by the governor. New Jersey tends to elect Democratic governors while Texas elects Republicans. -- Texas recently added provisions to restrict the ability of small shareholders who own less than 3% of the company to sue or bring shareholder proposals. Exxon said it doesn't plan to impose those rules. Proxy advisors Glass Lewis and Institutional Shareholder Services both urged against a move to Texas. -- The oil major has also taken measures to prevent the kind of embarrassing campaigns like in 2021, when activist investor Engine No. 1 won a proxy fight over its corporate strategy and environmental impacts. Another activist, Jeffrey Ubben, also joined the board then. Ubben didn't stand for election this time.
What's Next: When Exxon let retail shareholders automatically vote in favor of management recommendations, more than 100,000 shareholders representing over 150 million shares signed up. Retail shareholders tend to be more management-friendly, analysts say, and their votes can insulate companies from other investors pushing for change.
-- Avi Salzman and Janet H. Cho
-- Newsletter edited by Liz Moyer, Patrick O'Donnell, Rupert Steiner
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(END) Dow Jones Newswires
May 28, 2026 06:21 ET (10:21 GMT)
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