What Happened?
A number of stocks jumped in the afternoon session after a two-day wave of AI conviction, sparked by Snowflake's best single-session day on record and extended by Dell's blowout earnings continued to weaken the narrative that weighed on the software sector.
Snowflake's Q1 results sent the stock up 36% on May 28, its strongest single-day gain since its 2020 IPO, showing that AI is accelerating demand for enterprise data platforms rather than cannibalizing them. Then Dell's Q1 report, published after the bell on May 28, confirmed the physical infrastructure layer is expanding at a scale most analysts had not modelled: $43.8 billion in revenue, up 88% year-over-year, AI server revenue of $16.1 billion up 757%, and a record AI backlog of $51.3 billion.
The combined read-through was hard to ignore: enterprises are deploying AI at scale, and they need both the software layer and the hardware stack to do it. A supportive macro backdrop provided additional lift. The 10-year Treasury yield fell to 4.45% on reports of a US-Iran truce extension, reducing the discount rate on long-duration growth stocks.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Developer Operations company JFrog (NASDAQ: FROG) jumped 9.1%. Is now the time to buy JFrog? Access our full analysis report here, it’s free.
- E-commerce Software company Wix (NASDAQ: WIX) jumped 8.5%. Is now the time to buy Wix? Access our full analysis report here, it’s free.
- Data Analytics company Samsara (NYSE: IOT) jumped 8.6%. Is now the time to buy Samsara? Access our full analysis report here, it’s free.
Zooming In On JFrog (FROG)
JFrog’s shares are very volatile and have had 29 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 7 days ago when the stock gained 3.8% as Treasury yields cooled and risk-on rotation lifted AI-linked growth names, helping the sector recover from the previous day's Intuit-driven sell-off.
SaaS companies (Salesforce, ServiceNow, Workday, Snowflake, MongoDB, Datadog) are the textbook example of long-duration cash flows: they earn revenue over multi-year contracts with high renewal rates, which makes them extremely sensitive to the discount rate. A ten-basis-point drop in the 10-year yield can lift SaaS valuations 5-10% by itself, because these stocks trade on EV/forward-revenue multiples that move directly with rates. The combination of cooling yields and Iran peace progress also calmed fears that AI commoditization (yesterday's Intuit thesis) is universal across SaaS. Investors appeared to be sifting the market for SaaS companies whose moats AI extends, a healthier setup than the previous day's blanket sell-off.
JFrog is up 33.5% since the beginning of the year, and at $79.55 per share, it has set a new 52-week high. Investors who bought $1,000 worth of JFrog’s shares 5 years ago would now be looking at an investment worth $1,880.
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