Snowflake Plummets 2.3%: What’s Fueling the Selloff Amid AI Hype?

Summary
• Snowflake (SNOW) trades at $217.43, down 2.3% intraday, with a 52-week range of $120.1–$280.67.
• Q3 revenue grew 29% to $1.21B, but net revenue retention dipped to 125%.
• Motley Fool analysts excluded SNOW from their top 10 stock picks, citing growth sustainability risks.
• Options volume spikes on deep-out-of-the-money calls and puts, signaling heightened volatility.

Snowflake’s sharp intraday decline has sparked debate among investors. Despite robust Q3 earnings and strategic AI partnerships, the stock’s 2.3% drop reflects growing skepticism about its ability to maintain growth momentum. With the 200-day moving average at $206.30 acting as a critical support level, traders are now scrutinizing technical indicators and options activity for clues about the next move.

Q3 Earnings Beat Overshadowed by Growth Concerns
Snowflake’s Q3 results highlighted 29% revenue growth and a 125% net revenue retention rate, yet the stock fell sharply as investors questioned the sustainability of its AI-driven expansion. The company’s strategic partnerships with Anthropic and OpenAI, while promising, have yet to translate into clear profit-margin improvements. Additionally, the Motley Fool’s exclusion of SNOW from its top 10 stock list—despite past successes like Netflix and Nvidia—fueled bearish sentiment. The market’s focus has shifted to whether Snowflake can balance its aggressive AI investments with profitability, particularly as its dynamic P/E ratio remains negative (-54.6), signaling ongoing losses.

Software Sector Mixed as Snowflake Dips Amid Amazon’s Gains
The Software—Infrastructure sector saw mixed performance, with Amazon (AMZN) rising 1.15% as its cloud division gains traction. Snowflake’s 2.3% decline contrasts sharply with Amazon’s resilience, highlighting divergent investor sentiment. While Snowflake’s AI partnerships position it as a long-term play, Amazon’s broader ecosystem and profitability metrics currently dominate market attention. The sector’s 1.64% turnover rate for SNOW suggests active trading but lacks the conviction seen in leaders like AMZN.

Options Volatility and ETFs Signal High-Risk, High-Reward Setup
• 200-day average: $206.30 (below current price)
• RSI: 33.58 (oversold)
• MACD: -5.87 (bearish), Signal Line: -2.31
• Bollinger Bands: Lower band at $220.95 (near current price)

Technical indicators suggest a potential short-term rebound from oversold levels, but the bearish MACD and low RSI imply caution. The 200-day MA at $206.30 is a critical support level; a break below could trigger deeper declines. For leveraged ETFs, YieldMax SNOW Option Income Strategy ETF (SNOY) and T-REX 2X Long SNOW Daily Target ETF (SNOU) are underperforming, with SNOY down 2.22% and SNOU down 3.54%.

Top Options Contracts:
• SNOW20251219C220: Call, Strike $220, Expiry 12/19, IV 33.32%, Leverage 54.51%, Delta 0.45, Theta -0.635, Gamma 0.033, Turnover $793,575. High leverage and moderate delta make this ideal for a rebound scenario. If SNOW rallies above $220, this call could capitalize on short-term momentum.
• SNOW20251219C225: Call, Strike $225, Expiry 12/19, IV 35.85%, Leverage 85.50%, Delta 0.31, Theta -0.506, Gamma 0.027, Turnover $304,872. High leverage and reasonable IV position this as a speculative play. A 5% upside from current price would yield a $12.50 payoff, but theta decay is steep.

Payoff Estimation: Under a 5% downside scenario (price at $206.56), the SNOW20251219C220 would expire worthless, while SNOW20251219C225 would also expire out of the money. Aggressive bulls may consider SNOW20251219C220 into a bounce above $220, but bearish traders should monitor the 200-day MA for a potential breakdown.

Backtest Snowflake Stock Performance
The backtest of Snowflake (SNOW) after an intraday plunge of at least -2% from 2022 to the present shows mixed short-term performance but a positive long-term return. The 3-Day win rate is 51.06%, the 10-Day win rate is 52.33%, and the 30-Day win rate is 51.91%, indicating a higher probability of positive returns in the short term. However, the maximum return during the backtest was only 3.10% over 30 days, suggesting that while there is a good chance of recovery, the overall returns are modest.

Bullish Breakout or Bearish Breakdown? Key Levels to Watch
Snowflake’s 2.3% intraday drop reflects a tug-of-war between AI optimism and profit concerns. While the stock’s oversold RSI and proximity to the Bollinger lower band suggest a potential rebound, the bearish MACD and negative P/E ratio caution against overconfidence. Investors should watch the 200-day MA at $206.30 as a critical support level; a break below could trigger a test of the 52-week low. Meanwhile, Amazon (AMZN)’s 1.15% gain underscores the sector’s mixed dynamics. For now, SNOW20251219C220 offers a high-leverage play on a rebound, but bearish traders should prioritize liquidity and theta decay in their options strategies. Watch for $220 breakout or breakdown below $206.30.