2 Artificial Intelligence (AI) Stocks to Buy Before They Soar 82% and 124%, According to Certain Wall Street Analysts

The recent pullback in the stock market may have some investors on edge. The stocks selling off the most over the last couple of weeks are the same ones that led the stock market higher over the previous two years: artificial intelligence stocks.

Several factors have led to the recent dip in the biggest AI stocks, including advances by China's DeepSeek AI and growing economic uncertainty. However, experts still expect a lot of growth in artificial intelligence over the coming years. The total AI market could grow from $233 billion in 2024 to $1.77 trillion by 2032, according to research published by Fortune Business Insights. That could mean right now is a great opportunity to buy some of the most underpriced AI stocks for the long run.

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Two stocks look particularly appealing amid the pullback in stock prices and present upside of up to 124%, according to certain Wall Street analysts. Here's why investors should take a closer look at Datadog (NASDAQ: DDOG) and Advanced Micro Devices (NASDAQ: AMD).

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1. Datadog: 82% upside

Datadog enables businesses to monitor data across all their technology platforms, helping them identify problems quickly and fix them before they grow widespread. As more and more businesses shift more of their workloads to the cloud and expand their integrations with AI, Datadog's services become increasingly important.

The company disappointed investors with its outlook for slower-than-expected revenue growth and earnings growth in 2025. Analysts have since revised down their estimates. But Loop Capital maintains its $200 price target on the stock, implying 82% upside, as of this writing. The analyst sees a strong runway for Datadog's total addressable market to continue expanding well into the next decade. That's driven by Datadog's continual product expansion into new markets, including AI and security. If Datadog captures just a small percentage of that market, it'll see strong earnings growth as it scales.

Datadog is already seeing strong growth in what it calls "AI-native customers." These are companies whose products or services are based heavily on their AI capabilities. These customers accounted for 6% of Datadog's annual recurring revenue in the fourth quarter, double the prior-year quarter. That growth rate could continue as more AI businesses enter the market and seek Datadog's observability capabilities and existing customers expand their needs as they grow.

While these AI-native customers account for a small but rapidly growing portion of Datadog's business, the company's AI features are useful to anyone using large language models to improve their business operations. Datadog's LLM observability service helps businesses identify errors produced by large language models and what caused them. It can also monitor operational metrics, including costs and performance, which can help businesses optimize the efficiency of their LLMs and the services calling them.

On top of that, Datadog developed its own AI-powered assistant, called Bits AI. The tool allows users to interact with Datadog's observability platform using natural language to identify what's going wrong in their systems and generate incident summaries. That makes the platform more accessible to more users.

About 3,500 of Datadog's approximately 30,000 customers are using at least one of its AI integrations as of the end of 2024. That's up from 2,000 customers as of May 2024.

Datadog stock trades at an enterprise-value-to-revenue multiple of about 13. That's not exactly cheap, but it's about as cheap as the stock has ever been. Considering the company could grow its top line at a 20% rate for years to come and has room to improve its margins as it scales, it may be worth buying at this price.

2. Advanced Micro Devices: 124% upside

Coming into 2024, AMD was well-positioned to take a bigger share of the rapidly growing market for graphics processing units (GPUs). As big tech spent heavily on data centers, AMD's AI accelerators were a cheaper alternative to Nvidia's top-of-the-line chip and its proprietary CUDA platform. However, AMD continued to take a back seat to Nvidia.

AMD further disappointed investors with its outlook calling for a 7% sequential decline in total sales during the first quarter. During the earnings call, management confirmed the data center segment, which includes its AI chips, will see a similar decline.

But AMD's time may be coming. Rosenblatt's Hans Mosesmann has a price target of $225 on the stock, implying 124% upside as of this writing. He believes AMD management's forecast for the total addressable market for data center GPUs to grow to $500 billion by 2028. He sees the chipmaker as taking a "double-digit market share" in that market.

If AMD captures just 10% of the data center AI accelerator market in 2028 (i.e., $50 billion in revenue) it'll grow its data center business fourfold from 2024. And there's reason to believe its market share should rise into the double digits as more businesses look to drive the cost of AI inference lower over the long run, making the high-end Nvidia chips less essential.

But AMD is more than a GPU maker. Its x86 central processing unit (CPU) chips are extremely competitive and taking market share in both the PC and server markets. Management said it ended 2024 with well over 50% share at the majority of its CPU data center customers, driven by demand for its latest EPYC CPUs.

Despite not growing as fast as Nvidia in the GPU market, AMD is still generating strong revenue and earnings growth. Analysts expect 23% growth this year followed by 21% growth in 2026. On top of that, AMD has room to expand margins while still offering reasonably priced compute options for its customers. Management expects its operating margin to expand from 24% in 2024 to the mid-30% range over the long run.

Right now, AMD shares trade for just 21 times forward earnings. That's a bargain for an AI stock. But it looks even more appealing when you consider the potential for earnings growth. Analysts expect 35% earnings growth in 2026. It's hard to find that kind of growth potential at such a low price.

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Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Datadog, and Nvidia. The Motley Fool has a disclosure policy.