Snowflake Inc

Snowflake Inc. (SNOW), a provider of cloud data warehouse software, was a top contributor during the second quarter. Snowflake’s first-quarter results exceeded consensus expectations for both revenue and earnings. We continue to be impressed by the Company’s product innovation, and, importantly, Snowflake saw enough traction with one of its early AI products to raise guidance while attributing the increase specifically to that product. We believe Snowflake’s long-term potential remains misunderstood by most investors. While we trimmed our position size during the quarter due to share price appreciation, Snowflake remains a core position.

Snowflake is experiencing strong performance driven by its core data platform business and significant uplift from AI capabilities, including CoCo and Snowflake Intelligence. The CEO, Sridhar Ramaswamy, has increased the FY 2027 growth outlook from 27% to 31% year-over-year, indicating robust demand and adoption of AI across their business. This positions Snowflake as a core long-term holding in the Fund, especially as companies demonstrating tangible AI-driven tailwinds are outperforming in the current market environment.

Jennison expressed concerns about Snowflake's durability of growth, leading to its elimination from the portfolio. The manager's decision reflects a broader strategy to focus on companies with more reliable growth prospects, particularly in the AI and cloud sectors. This indicates a shift away from holdings perceived as having maturing growth trajectories, which includes Snowflake.

Snowflake has more than doubled its operating profit from a somewhat depressed base, indicating strong underlying performance despite market challenges. The manager believes that the current valuation reset, which has seen a 70%+ degradation over the past 15 months, does not reflect the fundamentals of the business. They argue that the market is incorrectly pricing in a looming collapse in earnings, while Snowflake and its peers have consistently beaten earnings estimates and are forecasting revenue acceleration in 2026. The manager sees the integration of AI into existing offerings as a positive for Snowflake, suggesting that the company will continue to thrive in the evolving enterprise software landscape.

We have owned Snowflake for some time now, and we see the company as a leader in converting the AI technology to a revenue-generating tool for enterprises. At its recent World Tour event in New York, Snowflake emphasized how its latest products—particularly Snowpark ML and new unstructured data capabilities—are helping organizations turn raw data into actionable intelligence. Early adopters across retail, travel, and financial services are already using Snowflake’s tools for tasks such as demand forecasting and customer experience optimization. These practical use cases illustrate why we see Snowflake as a long-term beneficiary of enterprise AI adoption.

The unrelenting AI boom has significantly benefited Snowflake, contributing to substantial gains in the tech sector. The hyperscalers' massive capital expenditure plans have driven this theme, with Snowflake being a key player in the market. The overall tech stocks surged by 11115555% on average, with semiconductors up 22225555%, indicating a strong growth trajectory for Snowflake as it capitalizes on these trends.

Shares of Snowflake were up 53% during the second quarter and have almost doubled off of their September lows. 2024 was a transition year at Snowflake as Sridhar Ramaswamy took over as CEO and the company materially accelerated its AI related product pipeline. As we work our way through 2025, Snowflake’s AI strategy is beginning to come into focus and to put it mildly, the opportunity is intriguing. Historically, Snowflake has given customers the ability to query and analyze company data, both structured and unstructured, across all public clouds in a secure, user-friendly manner. As we move into the AI age, Snowflake’s ambition is to allow this analysis to take place in real-time, often through the use of AI agents whether it be through Snowflake’s own applications or secure third-party applications. This is an advantaged position within an enterprise. Data analytics is a rapidly evolving market. Add into this Snowflake’s consumption based pricing model that can pick up changes in demand signals, real or transitory, on a quarter by quarter basis and it is no wonder that this is a volatile stock. That said, as Snowflake’s AI strategy plays out in the years to come, we think the upside in the shares make what can sometimes be a wild ride in the share price one worth taking.

Shares of Snowflake were up 53% during the second quarter and have almost doubled off of their September lows. 2024 was a transition year at Snowflake as Sridhar Ramaswamy took over as CEO and the company materially accelerated its AI related product pipeline. As we work our way through 2025, Snowflake’s AI strategy is beginning to come into focus and to put it mildly, the opportunity is intriguing. Historically, Snowflake has given customers the ability to query and analyze company data, both structured and unstructured, across all public clouds in a secure, user-friendly manner. As we move into the AI age, Snowflake’s ambition is to allow this analysis to take place in real-time, often through the use of AI agents whether it be through Snowflake’s own applications or secure third-party applications. This is an advantaged position within an enterprise. Data analytics is a rapidly evolving market. Add into this Snowflake’s consumption based pricing model that can pick up changes in demand signals, real or transitory, on a quarter by quarter basis and it is no wonder that this is a volatile stock. That said, as Snowflake’s AI strategy plays out in the years to come, we think the upside in the shares make what can sometimes be a wild ride in the share price one worth taking.

Snowflake Inc. has been a strong performer within the Information Technology sector, contributing significantly to the Fund's overall outperformance. The company is positioned well to benefit from the increasing demand for data management solutions, particularly as AI workloads grow. The manager believes that Snowflake's competitive moat is widening, driven by its innovative technology and strong market position. The Fund's conviction in Snowflake's long-term growth potential remains high, as evidenced by its substantial contribution to the Fund's returns this quarter.