Analysts at Redburn Atlantic downgraded Snowflake (NYSE:SNOW) and MongoDB (NASDAQ:MDB) to Sell from Neutral on Tuesday, saying they “lack a clear Gen-AI advantage, posing a budget reallocation risk that their current valuations do not reflect.”
SNOW and MDB fell 2.1% and 3.1% at Tuesday's market open, respectively.
The real battle in generative AI lies beyond eye-catching consumer apps, Redburn’s team noted.
Big Tech may bear the training costs, but the true value emerges in enterprise customization, where inference leads to significant gains, creating durable advantages. However, this customization is costly and complex, requiring lengthy integration periods.
“In this new era, the focus shifts from sheer data volume to accessibility and quality. While enterprises aim to leverage existing data, high-quality synthetic data residing within some models is often overlooked,” analysts said.
“Enterprise Gen-AI adoption is not a universal win. We expect budget reallocation risks for players without clear, direct exposure to the new stack. Those positioned to deliver tangible Gen-AI benefits are best placed.”
Meanwhile, cybersecurity will be key in fighting against AI-powered threats, and IT services will play a major role in preparing organizations and deploying generative AI solutions.
Redburn’s top picks to capitalize on this theme include Amazon, Microsoft, Accenture, Capgemini, Palo Alto, CrowdStrike, and Darktrace, all of which are rated Buy.