We recently compiled a list of the 10 Hot Growth Stocks to Invest in According to Analysts. In this article, we are going to take a look at where Snowflake Inc. (NYSE:SNOW) stands against the other hot growth stocks.

The big rally in the broader stock market might have ceased, but there are a lot of things to focus on under the surface, says Morningstar. Notably, technology stocks, which were the leading contributors to the big bull market in 2023 and 2024, have seen strong declines in 2025. Elsewhere, other sectors including financial services, basic materials, and healthcare continue to see new investor interest.

Morningstar, while highlighting the comment from Michael Arone (chief investment strategist at State Street Global Advisors), mentioned that non-US markets including China, the UK, and Germany have seen strong rallies. Notably, the market strategists continue to see a subtle transition in leadership. The broader markets have been struggling to find focus due to the uncertainties related to the future. The US Fed rate cuts are not guaranteed this year, while inflation remains sticky. Also, the potential impact of Trump’s economic policy proposals is unknown yet.

Is a Market Rotation on the Horizon? 

To provide a brief perspective, when a rotation occurs, the market investors tend to shift their focus from stocks that were critical to a strong trend to other parts of the broader equity market that have not seen much movement. Morningstar believes that there is plenty of evidence that a rotation is underway. Technology stocks, which have seen an increase of over 36% in 2024, are down in 2025. The NASDAQ-100 Technology Sector has seen a decline of ~0.74% on a YTD basis.

The basic materials sector was the worst performing sector in 2024. However, so far in 2025, related stocks have managed to deliver decent gains. Dow Jones U.S. Basic Materials Index increased by over ~6% on the YTD basis. Also, healthcare stocks have grabbed investors’ attention after they returned ~2.7% in 2024, says Morningstar. Dow Jones U.S. Health Care Index returned over 7% on a YTD basis. As per Dan Kemp, Morningstar chief research and investment officer, there seems to be a rotation in terms of valuations.

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

UBS Remains Optimistic About S&P 500 in 2025 Despite Challenges

UBS has reiterated the importance of portfolio diversification and hedging in a bid to navigate the market volatility moving forward. Investors are required to consider capital preservation strategies so that they can limit the portfolio losses. Investors looking to build up long-term AI exposure can use structured strategies or “buy the dip” strategy in certain quality AI stocks.

UBS expects 2025 capex from the Big 4 US tech firms to increase by 35% to reach US$302 billion, with the firm seeing strong demand for frontier models. Due to the AI adoption trends fueling monetization, it projects mid-teens returns for global AI stocks this year.

Our Methodology

To list the 10 Hot Growth Stocks to Invest in According to Analysts, we used a screener to shortlist stocks that have gained at least 30% over the past 6 months and that analysts see at least 20% upside to over the next 12 months. Next, we ranked the stocks in ascending order of their average upside potential, as of March 5. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A software engineer at work, surrounded by a wall of computer monitors connected to a 'Data Cloud' platform.

Snowflake Inc. (NYSE:SNOW)

% Gain Over 6-Month Period: ~43.9%

Average Upside Potential: ~37.6%

Number of Hedge Fund Holders: 85

Snowflake Inc. (NYSE:SNOW) offers a cloud-based data platform for various organizations. Derrick Wood from TD Cowen reiterated a “Buy” rating on the company’s stock with a price objective of $210.00. The analyst’s rating is backed by factors highlighting the company’s healthy performance and strong prospects. After Snowflake Inc. (NYSE:SNOW)’s Q4 2024 results, TD Cowen sees a stabilization in core consumption growth, with favourable impacts from Iceberg and growth traction in Data Engineering and AI/ML, and the company’s management expects this to continue.

Overall, the adoption of new products, like Snowpark and Iceberg, continues to contribute to revenue growth, and Snowflake Inc. (NYSE:SNOW) has been seeing strong consumption rates among large customers. Such factors are supporting the analyst’s Buy rating. The company’s focus on AI integration and new product development can act as catalysts for strong growth. With AI workloads coming online and gaining traction, they can fuel higher data consumption and platform usage. New offerings, including Snowpark and Cortex, can expand Snowflake Inc. (NYSE:SNOW)’s value proposition, bringing in new customers and encouraging existing clients to enhance usage.

Baron Funds, an investment management firm, released its Q3 2024 investor letter. Here is what the fund said:

“Snowflake Inc. (NYSE:SNOW) is a leading cloud data platform predominantly used for data analytics. Shares fell 15.2% in the third quarter due to a cybersecurity incident, a shifting competitive landscape, a change in leadership, and general macro complexities which are pressuring customer IT budgets. With generative AI (Gen AI) front and center, both investors and customers are closely evaluating Snowflake’s positioning in the future data ecosystem. Databricks and other competitors whose core users are data scientists who are also key buyers of Gen AI technologies, are benefiting. In addition, while Snowflake’s product innovation push should fuel future growth, it may also lead to short-term headwinds to profitability. Management reported healthy demand for its core data analytics, evidenced by solid growth rates among current customers alongside new go-to-market initiatives that could support growth. We are optimistic the new CEO, Sridhar Ramaswamy, can lead the company towards an AI-centric strategy, and therefore remain shareholders.”

Overall SNOW ranks 9th on our list of the hot growth stocks to invest in according to analysts. While we acknowledge the potential of SNOW as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than SNOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.

 

Disclosure: None. This article is originally published at Insider Monkey.