What Happened?
Shares of database software company MongoDB (MDB) jumped 7.8% in the morning session as the debate around the future of AI continues following the unveiling of DeepSeek. The market is recalibrating and rotating to stocks that are not only more insulated if DeepSeek prevails in the AI arms race but to stocks that may actually benefit no matter who wins that race. The proliferation of AI will be a general tailwind to demand for cybersecurity, big data, and automation software.
For example, AI can make bad actors better and make the search for vulnerabilities faster. This means that enterprises will need more of what CrowdStrike, Zscaler or Cloudflare offer. Additionally, more data is only valuable if the mountains of numbers, text, and videos can lead to actionable insights. AI can do exactly that, meaning that enterprises will get more value from platforms like Snowflake and MongoDB. Similarly, AI can make automation software more valuable by making it more adaptive, which means that customers can extract more value from platforms like ServiceNow and Appian.
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What The Market Is Telling Us
MongoDB’s shares are very volatile and have had 23 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 biggest move we wrote about over the last year was 5 months ago when the stock gained 17.9% on the news that the company reported a "beat and raise" quarter. Second quarter results blew past analysts' billing expectations. The top-line benefitted from the strong performance of its Atlas cloud offering, which recorded 27% y/y sales growth while driving 71% of overall revenue. Next quarter's revenue guidance also came in higher than Wall Street's estimates. While AI isn't yet a significant revenue driver for the business, MDB launched the MongoDB AI Applications Program (MAAP), to accelerate demand for its AI solutions. That the company raised full year guidance across the board is icing on the cake. However, the quarter wasn't without challenges, as the business observed light deceleration in the consumption of existing workloads due to macro headwinds. Overall, this was a great quarter.
MongoDB is up 14.8% since the beginning of the year, but at $280.76 per share, it is still trading 43.9% below its 52-week high of $500.90 from February 2024. Investors who bought $1,000 worth of MongoDB’s shares 5 years ago would now be looking at an investment worth $1,840.
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