Two Undervalued AI Stocks Offering the Best Entry Points Before Major Gains: What Wall Street Sees

While artificial intelligence stocks have dominated market returns—accounting for roughly three-quarters of S&P 500 gains since ChatGPT’s introduction in late 2022—investment strategists remain optimistic about specific undervalued opportunities. JPMorgan Chase analysts highlight two companies trading below their intrinsic value: The Trade Desk and Datadog. These undervalued stocks represent among the best opportunities for investors seeking exposure to AI-driven business models before significant market repricing occurs.

Recent price targets from major Wall Street firms reveal substantial upside potential. Stifel analyst Mark Kelley has set The Trade Desk’s target at $74 per share—suggesting a 196% gain from its $25 valuation—while Monness’s Brian White targets Datadog at $255 per share, implying 112% appreciation from its $120 price point. Notably, while not all analysts expect triple-digit returns within a single year, consensus views both companies as trading below fair value, presenting compelling opportunities for long-term investors.

Why The Trade Desk Remains Undervalued Despite Market Headwinds

The Trade Desk operates as an independent advertising technology platform, distinguishing itself through an unbiased approach to media buying optimization. Rather than competing with publishers for ad inventory, the company provides software enabling media buyers to plan, measure, and refine digital campaigns across the open internet ecosystem. Its platform leverages artificial intelligence to evaluate impressions, customize bidding strategies, and adjust targeting based on real-time performance data.

The company’s competitive moat stems from its neutral position. Unlike Alphabet’s Google and Amazon—which face inherent incentives to direct spending toward proprietary inventory like YouTube and Prime Video—The Trade Desk operates free from such conflicts. This independence makes publishers more willing to share performance data, enhancing the effectiveness of targeting and measurement capabilities across decentralized networks of websites, apps, and streaming services.

The Trade Desk has established market leadership in connected TV advertising, one of digital advertising’s fastest-expanding segments. However, generative AI tools have prompted investor caution, with concerns that these technologies might suppress ad spending on independent platforms. These market worries, while not unfounded, may have overshot. Wall Street’s median price target of $50 per share implies approximately 100% upside. Combined with JPMorgan’s forecast of 13% annual earnings growth through 2026, the current valuation of 15 times earnings appears reasonable relative to growth prospects and the company’s structural advantages in the open internet advertising market.

Datadog’s Undervalued Position Within High-Growth AI Markets

Datadog has constructed a leading observability and security software platform consolidating signals across entire enterprise technology stacks—infrastructure, applications, and services—on unified dashboards. The company’s proprietary AI engine, called Watchdog, detects system anomalies, generates incident alerts, and conducts automated root cause analysis. These capabilities address critical operational challenges facing IT departments managing increasingly complex technology environments.

Independent research validates Datadog’s market position. Gartner recognizes the company as a leader in both digital experience monitoring and observability platforms, two sectors projected to expand at 16% annually through 2030. Forrester Research similarly identifies Datadog as a leader in AI-powered IT operations, a category forecast to grow 15% yearly. Morgan Stanley analyst Keith Weiss notes that Datadog has captured disproportionate market share gains in observability for multiple consecutive years, driven by IT departments’ preference for platforms consolidating diverse performance-monitoring tools.

The company’s recent investments in AI applications—including monitoring tools for AI infrastructure and automated incident resolution agents—position it advantageously within emerging AI operations markets. Despite reporting 20% adjusted earnings growth in the fourth quarter, the 60-times-earnings valuation may initially appear elevated. However, substantial research and development spending creates capacity for earnings acceleration as these AI investments mature and generate returns.

Wall Street’s median price target of $180 per share implies 50% upside potential from the $120 base price. While this may not deliver triple-digit returns within twelve months, patient investors building long-term technology exposure should evaluate the company’s exceptional market position and growth runway. The combination of near-term earnings growth and longer-term AI market tailwinds creates a compelling case for including Datadog among the best undervalued stocks for forward-looking portfolios.

Constructing Your Strategy: Best Practices for Identifying and Buying Quality Opportunities

The broader investment landscape continues rewarding investors who identify undervalued opportunities before market consensus shifts. The trade desk and Datadog exemplify companies where fundamental value may not yet fully reflect in current valuations. Both companies possess sustainable competitive advantages, expanding market categories, and management teams investing heavily in future growth engines.

When evaluating these or similar opportunities, consider the companies’ structural competitive advantages, analyst consensus views, growth runway in their respective markets, and valuation relative to growth expectations. The best investment opportunities often emerge when solid businesses face temporary market skepticism—precisely where these two AI-enabled platforms appear positioned today.