Finding Undervalued Stocks in the AI Sector: Why Wall Street Sees 100-196% Upside in Two Overlooked Plays

The artificial intelligence boom has reshaped equity markets dramatically. Since ChatGPT’s late 2022 debut, AI-related stocks have powered roughly three-quarters of S&P 500 gains, according to JPMorgan Chase analysis. Yet beneath the headlines, some undervalued stocks remain hiding in plain sight—particularly among companies that enable AI applications rather than dominate the AI headlines themselves.

Two firms stand out to Wall Street strategists as compelling undervalued stocks deserving investor attention: The Trade Desk and Datadog. While most analysts don’t expect these to triple their value within 12 months, the consensus view suggests both companies trade below their intrinsic worth. Let’s explore why.

The Trade Desk: An Independent Advertising Platform With 100% Upside Potential

The Trade Desk operates the industry’s primary software platform for digital media purchasing. Unlike competitors such as Alphabet (Google) and Amazon—which own the advertising inventory they sell—The Trade Desk functions as an independent intermediary. This structural advantage means no inherent conflict between the platform’s interests and media buyers’ interests.

Because publishers view The Trade Desk as neutral territory, they willingly share performance data that feeds the platform’s AI-driven optimization engine. This data advantage translates into superior targeting capabilities and measurement accuracy across the open internet: the constellation of websites, apps, and streaming services beyond tech giants’ walled gardens.

The Trade Desk commands particular strength in connected TV advertising, one of digital media’s fastest-expanding categories. Yet the stock has declined 80% from previous highs, as investors fret that generative AI tools will cannibalize open internet ad spending. While these concerns merit consideration, the underlying business remains attractive. Wall Street expects the company to grow adjusted earnings at 13% annually through 2026, making its current 15x earnings valuation appear reasonable for that growth rate.

The consensus Wall Street target price sits at $50 per share, suggesting 100% appreciation potential from current levels. Analyst Mark Kelley at Stifel projects an even more aggressive $74 target, implying 196% upside. For patient investors willing to weather near-term volatility, The Trade Desk represents an undervalued stock worth examining more closely.

Datadog: An Enterprise Software Leader Trading at Discount to Growth

Datadog provides observability and security software that consolidates signals from an organization’s entire technology infrastructure—servers, applications, and associated services—onto a unified dashboard. The platform’s AI engine (called Watchdog) detects performance anomalies, triggers incident notifications, and performs root cause analysis, dramatically reducing mean time to resolution for IT teams.

The market research community consistently validates Datadog’s competitive position. Gartner identifies the company as a leader in both digital experience monitoring and observability platforms, sectors forecast to expand at roughly 16% annually through 2030. Forrester Research recognizes Datadog as a top player in AI-powered IT operations, a market projected to grow 15% annually over the same span.

Morgan Stanley analyst Keith Weiss highlights that Datadog has captured the most market share gains in its core observability segment for several consecutive years. IT departments increasingly prioritize unified platforms that consolidate multiple monitoring tools, favoring Datadog’s integrated approach. Additionally, Datadog continues expanding its AI agent capabilities to automate incident response and threat detection—positioning it at the intersection of two powerful IT trends.

The company reported 20% adjusted earnings growth in Q4, yet trades at 60x earnings, which superficially appears elevated. However, Datadog invests heavily in R&D to fuel future expansion. This spending should unlock accelerating earnings growth in coming years as investments mature. Wall Street’s consensus price target of $180 per share implies 50% upside from current levels, with analyst Brian White at Monness setting an even more optimistic $255 target, suggesting 112% appreciation potential.

Why These Undervalued Stocks Merit Investor Consideration

Both companies exemplify a particular category of undervalued stocks: established businesses with strong competitive advantages that markets have temporarily repriced downward. The Trade Desk and Datadog operate in structurally attractive markets, benefit from significant AI tailwinds, and demonstrate pricing power with customers increasingly dependent on their platforms.

Historical perspective adds context. Netflix, recommended by Stock Advisor in December 2004, returned $414,554 on a $1,000 investment. Nvidia, added to the list in April 2005, generated $1,120,663 on the same $1,000. These examples illustrate the wealth-creation potential when investors identify quality undervalued stocks before broader market recognition.

The critical distinction remains that these are not short-term trading vehicles. Both require patience and conviction during periods when technology valuations contract. For investors with medium- to long-term horizons and tolerance for volatility, however, The Trade Desk’s 100% consensus upside target and Datadog’s 50% median target suggest these undervalued stocks offer asymmetric risk-reward profiles favoring the upside.

Before deploying capital, conduct thorough due diligence on each undervalued stock’s specific financial metrics, competitive positioning, and your own investment timeline. But for those seeking exposure to enterprise-focused AI platforms trading below analyst valuations, both names warrant serious consideration.