Adobe Faces Competition from AI-Powered Firms Like Figma and Canva: Jim Cramer

Jim Cramer discusses Adobe Inc. (NASDAQ:ADBE) and notes that AI-powered companies such as Figma and Canva are challenging Adobe's pricing and software offerings. Cramer acknowledges that Adobe's price has been maintained so far, but expresses uncertainty about the company's future.

Australian design software startup Canva has launched an employee stock sale, marking a significant leap in the company's valuation to $42 billion. This move comes as Canva aims to boost revenue and prepare for a potential IPO, focusing on artificial intelligence (AI) enhancements to its design tools [1].

The stock sale, which has been oversubscribed, allows employees to sell shares to new and existing investors, including Fidelity Management & Research Co. and JPMorgan Chase & Co.'s asset management arm. This is a strategic move to provide employees with liquidity while maintaining the company's private status. Canva's valuation has increased by more than 30% since 2024, when it was valued at $32 billion [1].

Canva is competing with established players like Adobe and Figma in the design space. Adobe, with its AI model Firefly, is also investing heavily in AI to stay competitive. However, the AI revolution is challenging the traditional Software as a Service (SaaS) model, which has been the backbone of companies like Adobe and Salesforce [2].

While Adobe's AI offerings are impressive, the company has faced challenges in converting AI spending into bottom-line results. Salesforce, another SaaS giant, has also seen its stock price fall despite significant AI investments. The market is not rewarding these companies for their AI upgrades, with their stock prices falling while the Nasdaq hits new highs [2].

Investors should consider the competitive landscape when evaluating companies like Adobe and Canva. Canva's focus on AI and its rapid growth have made it a significant player in the design software market. However, the future of these companies will depend on their ability to innovate and succeed in the face of intense competition from both established and newer players.

References:
[1] https://economictimes.indiatimes.com/markets/ipos/fpos/canva-begins-share-sale-at-42-billion-valuation-in-road-to-ipo/articleshow/123399698.cms
[2] https://finviz.com/news/144829/2-artificial-intelligence-ai-growth-stocks-hovering-around-52-week-lows-even-as-the-nasdaq-hits-new-highs