Why Datadog and The Trade Desk Are Bargains in a Volatile Tech Landscape

The Nasdaq-100’s recent turbulence has left investors scrambling to distinguish durable growth stories from overvalued relics. Among the wreckage, two software titans—Datadog (DDOG) and The Trade Desk (TTD)—stand out as rare exceptions. Both have delivered post-earnings resilience, superior valuations, and AI-driven trajectories that defy market pessimism. For investors willing to look past short-term volatility, these stocks offer a compelling case to buy the dip for long-term gains.

Datadog: Cloud Observability’s Unstoppable Growth Engine

Datadog’s Q1 2025 results underscore its dominance in the $81 billion cloud observability market. Revenue rose 25% year-over-year to $762 million, fueled by AI-driven tools like its monitoring solutions for BigQuery and expanded data centers. The company’s 22% operating margin and $272 million in operating cash flow highlight a maturing business model. Crucially, its 3,770 large customers—a 13% year-over-year jump—signal enterprise adoption that rivals like New Relic cannot match.

Despite trading 50% below its 52-week high, DDOG’s 25% revenue growth and strategic acquisitions (Eppo and Metaplane) position it to capitalize on the shift to AI-infused cloud infrastructure. With 11 new deals exceeding $10 million in Q1, its enterprise moat is widening. Analysts project 25%+ revenue growth through 2025, making its current P/S ratio of 5.8x a steal compared to peers.

The Trade Desk: Reinventing Ad Tech in the Open Internet Era

The Trade Desk’s 29% stock surge post-earnings reflects a rare combination of profitability and vision. Q1 revenue hit $616 million (+25% YoY), with net income rising to $51 million despite macro headwinds. The company’s open internet strategy—bolstered by Unified ID 2.0 and AI platform Kokai—is dislodging Google and Meta’s walled gardens. Its 95% customer retention rate (for 11 straight quarters) and 97% revenue growth for partners like The New York Post’s programmatic ads prove its value to advertisers.

TTD’s $1 trillion addressable market in privacy-compliant digital ads is unlocked by its AI-driven efficiency and data partnerships. The Sincera acquisition adds predictive analytics to its toolkit, while its OpenPath platform is revolutionizing programmatic sales. At 44x forward P/E (down from 80x earlier this year), TTD trades at a discount to its growth trajectory, with 31% annual EPS growth expected through 2025.

Why Now? Valuation Meets AI-Driven Market Leadership

Both stocks are priced to perfection for long-term investors:
- Valuation Recovery: DDOG’s 50% pullback and TTD’s P/E contraction reflect excessive bearishness, not fundamentals.
- AI as a Catalyst: Datadog’s AI monitoring and TTD’s AI ad optimization are not just buzzwords—they’re revenue-generating assets.
- Market Leadership: DDOG’s cloud-agnostic platform and TTD’s open ID ecosystem are defensible moats in fragmented markets.

Risks? Yes. But the Upside Outweighs the Downside

Economic uncertainty could dampen cloud spending and ad budgets. However, both companies have proven recession resilience: Datadog’s sticky enterprise contracts and TTD’s open internet growth are less cyclical than legacy ad platforms. Meanwhile, their cash-rich balance sheets (Datadog’s $2.6 billion in cash, TTD’s $1.2 billion buybacks) provide a safety net.

Conclusion: Buy the Dip, Avoid the FOMO

In a Nasdaq-100 market obsessed with short-term noise, Datadog and The Trade Desk offer clarity. Their AI-powered growth engines, fortress balance sheets, and undervalued multiples present a rare opportunity to buy top-tier tech at a discount. For investors with a 3–5-year horizon, these stocks are not just resilient—they’re recession-ready compounds. The question is not whether to act, but why you’re waiting.

The writing is on the wall: These are the companies redefining their industries. The dip is not a risk—it’s the reward.

—The Author