Since the launch of ChatGPT at the end of 2022, artificial intelligence (AI) stocks have become a core driver of the U.S. stock market. According to JPMorgan statistics, AI stocks have contributed approximately three-quarters of the S&P 500 Index’s gains during the same period. Although some AI companies’ share prices have risen significantly, some Wall Street analysts still believe there are significant undervaluation opportunities in specific AI-themed stocks and have set highly potential target prices. Among them, advertising technology company The Trade Desk (TTD) and observability platform Datadog (DDOG) have become the focus of attention.
Stifel analyst Mark Kelley recently set a target price of $74 per share for The Trade Desk, implying a massive upside of 196% from its current price of around $25. Meanwhile, Monness analyst Brian White set a target price of $255 per share for Datadog, suggesting a potential upside of 112% from its current price of around $120.
It is worth noting that although not all analysts covering these two companies expect their stock prices to achieve triple-digit growth within a year, the majority believe that both stocks are currently undervalued.
The Trade Desk is a company that develops advertising technology software, helping media buyers plan, evaluate, and optimize digital advertising campaigns. Its platform relies heavily on AI technology to evaluate ad impressions, customize bidding, and continuously adjust targeting parameters based on real-time performance data.
In fact, The Trade Desk has become a leading media buying platform in the open internet, particularly holding a strong position in the connected TV advertising sector, which is also one of the fastest-growing segments in the digital advertising industry. However, due to investor concerns that generative AI tools represented by ChatGPT might slow down advertising spending on the open internet, the company’s stock price has fallen 80% from its peak.
In response, some market views suggest that while investor concerns are reasonable, the stock appears to have been oversold. Wall Street generally expects The Trade Desk’s adjusted earnings to achieve annual growth of 13% by 2026. Based on this, its current price-to-earnings ratio of 15 times seems relatively cheap. Although achieving a 196% gain within a year is questionable, the current price level is still seen as a buying opportunity. Most analysts covering the stock hold a similar view, with a median target price of $50 implying 100% upside potential from the current price of $25.
Datadog primarily develops observability and security software. Its platform consolidates signals from an enterprise’s entire technology stack (including infrastructure, applications, and services) into a single dashboard, simplifying problem-solving and threat remediation processes. The platform is equipped with an AI engine named Watchdog, which can automatically detect anomalies, send event alerts, and perform root cause analysis.
Independent research firms speak highly of Datadog. Gartner considers it a leader in the fields of digital experience monitoring and observability tools, two markets expected to grow at an annual rate of approximately 16% by 2030. Forrester Research also rated it as a leader in AI for IT operations, a market projected to grow 15% annually over the same period.
Looking at financial data, Datadog’s adjusted profit grew by 20% in the fourth quarter. But frankly, its current price-to-earnings ratio of 60 times appears quite expensive. However, the company is investing heavily in research and development to support future growth, which leaves room for accelerated profit growth down the line. While achieving triple-digit returns in the short term is unlikely, some believe that patient investors should consider buying the stock. This view also aligns with the consensus of most Wall Street analysts. The stock’s median target price of $180 implies a 50% upside from its current price of $120.
