AI Stocks Poised for Significant Growth: Recommended by Select Wall Street Experts, with Projected Gains of 82% and 124%
Navigating the turbulent stock market can be a nerve-wracking experience for some investors. The stocks taking the biggest hits lately are those riding the artificial intelligence wave, the same ones that skyrocketed over the past two years.
Several factors have contributed to the recent slump in AI stocks, with China's DeepSeek AI making strides and economic uncertainties looming. However, despite these setbacks, industry experts predict significant growth in AI over the next decade. The AI market is projected to balloon from $233 billion in 2024 to an astounding $1.77 trillion by 2032, according to Fortune Business Insights. This could mean that now is an opportune moment to snap up some of the most undervalued AI stocks for the long haul.
Two stocks, in particular, are worth a closer look amidst the stock market's downturn, offering potential upside of up to 124% according to Wall Street analysts: Datadog and Advanced Micro Devices (AMD).
1. Datadog: 82% upside
Datadog empowers businesses to monitor data across every tech platform, helping them swiftly identify and fix problems before they spread. As more companies shift their workloads to the cloud and integrate with AI, Datadog's services become increasingly essential.
Although investors were initially disappointed by Datadog's outlook for slower revenue and earnings growth in 2025, analysts at Loop Capital have maintained a $200 price target on the stock, indicating a potential 82% upside. The analyst believes Datadog's total addressable market will continue expanding throughout the next decade due to its continuous product expansion and entry into new markets like AI and security. If Datadog manages to capture just a small portion of this vast market, it will see significant earning growth as it scales.
Datadog is already experiencing strong growth in its AI-native customers, which consist of companies whose products or services heavily rely on AI capabilities. These customers accounted for 6% of Datadog's annual recurring revenue in Q4 2022, double the proportion from a year prior. This growth rate is likely to continue as more AI businesses enter the market and existing customers expand their needs.
While AI-native customers make up a small but rapidly growing segment of Datadog's business, the company's AI features are beneficial to any business utilizing large language models to streamline operations. Datadog's LLM observability service helps businesses identify errors produced by large language models and the factors causing them. It can also monitor operational metrics, such as costs and performance, helping businesses optimize the efficiency of their LLMs and the services that call them.
Datadog recently introduced Bits AI, an AI-powered assistant that allows users to interact with the observability platform using natural language. This feature makes the platform more accessible to a broader audience. As of the end of 2024, around 3,500 of Datadog's approximately 30,000 customers are currently using at least one of its AI integrations – a figure that has more than doubled since May 2024.
Despite Datadog's relatively high enterprise-value-to-revenue multiple of about 13, the company's future growth potential and room to improve margins as it scales could make it a worthwhile investment at its current price.
2. Advanced Micro Devices: 124% upside
In 2024, Advanced Micro Devices (AMD) had a prime position to capture a larger share of the rapidly growing market for graphics processing units (GPUs). As big tech invested heavily in data centers, AMD's AI accelerators presented a cheaper alternative to Nvidia's top-of-the-line chip and its proprietary CUDA platform. However, despite its competitive edge, AMD lagged behind Nvidia.
Disappointing investors further, AMD anticipated a 7% sequential decline in total sales for Q1 2024, with its data center segment (which includes AI chips) experiencing a similar decline during the earnings call.
Despite its slower growth compared to Nvidia in the GPU market, AMD is still generating robust revenue and earnings growth. Analysts predict 23% growth in 2023 and 21% growth in 2024. Beyond its GPU offerings, AMD's x86 central processing unit (CPU) chips are highly competitive and gaining market share in both the PC and server markets. With more than 50% share at most of AMD's CPU data center customers due to demand for its latest EPYC CPUs, AMD seems poised for further success.
Hans Mosesmann of Rosenblatt holds an optimistic outlook on AMD, setting a price target of $225 on the stock, implying a 124% upside. He believes AMD could capture a double-digit market share in the massive ($500 billion by 2028) data center GPU market and sees this as AMD's breakout moment.
If AMD captures just 10% of the data center AI accelerator market in 2028 (i.e., $50 billion in revenue), it would quadruple its data center business since 2024. With more businesses focusing on driving down the cost of AI inference in the long run, AMD's competitive pricing and high-end offerings could prove appealing to a growing customer base.
In conclusion, while the current stock market downturn may have investors feeling uneasy, it could present an opportunity to buy undervalued AI stocks with significant growth potential. The passage of time and advancements in both technology and industry trends could prove fruitful for investors willing to ride out the tougher market periods.
- Analysts at Loop Capital have maintained a $200 price target on the Datadog stock, indicating a potential 82% upside, believing its total addressable market will continue expanding throughout the next decade due to continuous product expansion and entry into new markets like AI and security.
- Despite AMD's slower growth compared to Nvidia in the GPU market, AMD is still generating robust revenue and earnings growth, with analyst Hans Mosesmann of Rosenblatt holding an optimistic outlook on AMD, setting a price target of $225 on the stock, implying a 124% upside.
- Datadog's services become increasingly essential as more companies shift their workloads to the cloud and integrate with AI, with analysts at Loop Capital attributing the 82% upside potential to its continuous product expansion and entry into new markets like AI and security.
- The AI market is projected to balloon from $233 billion in 2024 to an astounding $1.77 trillion by 2032, making now potentially an opportune moment to snap up undervalued AI stocks like Datadog and Advanced Micro Devices (AMD) for the long haul.
