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Is Datadog (DDOG) an AI Winner?

Baron Funds, an investment management company, released its “Baron Opportunity Fund” second quarter 2024 investor letter. A copy of the letter can be downloaded here. In the second quarter, the fund rose 4.35% (Institutional Shares), lagged the Russell 3000 Growth Index, which gained 7.80%, and essentially matched the S&P 500 Index, which advanced 4.28%. In the first half of 2024, the fund posted solid gains, rising 20.44% compared to a 19.90% return for the Russell 3000 Growth Index and beating the S&P 500 Index’s 15.29% gain. After a slow start to the quarter, U.S. stocks increased steadily in May and June. Increased worries about inflation, the pace of expected rate cuts by the Federal Reserve, and growing geopolitical tensions in the Middle East were blamed for the early market weakness. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.

Baron Opportunity Fund highlighted stocks like Datadog, Inc. (NASDAQ:DDOG) in the second quarter 2024 investor letter. Datadog, Inc. (NASDAQ:DDOG) is an observability and security platform for cloud applications. The one-month return of Datadog, Inc. (NASDAQ:DDOG) was -2.14%, and its shares gained 28.19% of their value over the last 52 weeks. On August 21, 2024, Datadog, Inc. (NASDAQ:DDOG) stock closed at $117.74 per share with a market capitalization of $39.696 billion.

Baron Opportunity Fund stated the following regarding Datadog, Inc. (NASDAQ:DDOG) in its Q2 2024 investor letter:

“In our view, the enterprise software winners will have to be better at delivering AI services and features than build-your-own AI tools, and they will have to use their incumbency or leadership advantages to ward off upstarts. We believe the winners will be the ones that have a well-established product development culture of innovation and iteration; differentiated proprietary, industry, and customer data; distribution advantages with large customer bases, successful go-to-market efforts, and key partners; well-designed workflows where AI improves the user interface, intelligent predictions/recommendations, and automation; and established always-on connectivity and feedback from their customers; among other things.

Here are a few examples of our software investments that we believe are AI winners: Datadog, Inc. (NASDAQ:DDOG), a cloud observability platform that the leading LLM providers are using today to monitor their AI apps; these AI customers are already driving nearly $100 million of annual recurring revenue for Datadog already.”

A close-up of a laptop with a software engineer coding on the monitor.

Datadog, Inc. (NASDAQ:DDOG) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 79 hedge fund portfolios held Datadog, Inc. (NASDAQ:DDOG) at the end of the second quarter which was 77 in the previous quarter. In the second quarter Datadog, Inc.’s (NASDAQ:DDOG) revenue increased by 27% year-over-year to $645 million. While we acknowledge the potential of Datadog, Inc. (NASDAQ:DDOG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

In another article, we discussed Datadog, Inc. (NASDAQ:DDOG) and shared Jim Cramer’s Top bullish stock picks. In addition, please check out our hedge fund investor letters Q2 2024 page for more investor letters from hedge funds and other leading investors.

READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.

Disclosure: None. This article is originally published at Insider Monkey.

The $250 Trillion AI Hype is Real. A few years from now, you’ll probably wish you’d bought this stock.

When Jeff Bezos said that one breakthrough technology would shape Amazon’s destiny, even Wall Street’s biggest analysts were caught off guard.

Fast forward a year and Amazon’s new CEO Andy Jassy described generative AI as a “once-in-a-lifetime” technology that is already being used across Amazon to reinvent customer experiences.

At the 8th Future Investment Initiative conference, Elon Musk predicted that by 2040 there would be at least 10 billion humanoid robots, with each priced between $20,000 and $25,000.

Do the math. According to Musk, this technology could be worth $250 trillion by 2040.

Put another way, that’s roughly equal to:

  • 175 Teslas
  • 107 Amazons
  • 140 Metas
  • 84 Googles
  • 65 Microsofts
  • And 55 Nvidias

And here’s the wild part — this $250 trillion wave isn’t tied to one company, but to an entire ecosystem of AI innovators set to reshape the global economy.

It’s a leap so massive, it could reshape how businesses, governments, and consumers operate worldwide.

Even if that $250 trillion figure sounds ambitious, major firms like PwC and McKinsey still see AI unlocking multi-trillion-dollar potential.

How could anything be worth that much?

The answer lies in a breakthrough so powerful it’s redefining how humanity works, learns, and creates.

And this breakthrough has already set off a frenzy among hedge funds and Wall Street’s top investors.

What most investors don’t realize is that one under-owned company holds the key to this $250 trillion revolution.

In fact, Verge argues this company’s supercheap AI technology should concern rivals.

Before I reveal the details, let’s talk about how some of the richest people on the planet are positioning themselves.

  • Bill Gates sees artificial intelligence as the “biggest technological advance in my lifetime,” more transformative than the internet or personal computer, capable of improving healthcare, education, and addressing climate change.
  • Larry Ellison — through Oracle, is spending billions on Nvidia chips and partnering with Cohere to embed generative AI across Oracle’s cloud and apps.
  • Warren Buffett — not known for tech hype — says this breakthrough could have a ‘hugely beneficial social impact.

When billionaires from Silicon Valley to Wall Street line up behind the same idea — you know it’s worth paying attention to.

Even as we admire what Tesla, Nvidia, Alphabet, and Microsoft have built, we believe an even greater opportunity lies elsewhere…

But the real story isn’t Nvidia — it’s a much smaller company quietly improving the critical technology that makes this entire revolution possible.

And judging by what I’m hearing from both Silicon Valley insiders and Wall Street veterans…

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