Datadog could gain ground due to growing demand for solutions that support developers’ work on artificial intelligence models, according to Guggenheim. The investment firm upgraded the software platform provider to buy from neutral. It also set a $175 price target on shares, implying 50.2% upside from Wednesday’s close. “Based on our industry research and checks, we believe that Datadog is a primary beneficiary of AI-driven growth in data volumes and IT complexity,” analyst Howard Ma said in a note to clients. Datadog offers several tools that provide insights into security, performance and costs to help developers troubleshoot and improve their applications. DDOG YTD mountain DDOG year to date As part of its offerings, the company also provides tools for large-language model observability, or the practice of monitoring AI models trained on large data sets to evaluate their behavior and performance. Those types of products, alongside Datadog’s AI-powered, autonomous, or semi-autonomous service could give Datadog’s shares a boost, according to Guggenheim. “AI observability … and sales capacity and productivity increases are all potential levers for upside,” Ma wrote. The analyst added that Datadog has strong revenue contribution from multiple products, including its Bits AI, which is an AI-powered agent that helps engineers investigate and fix production incidents. He also noted that Datadog has “a sophisticated backend architecture that is a deep moat against competition and potential commoditization via [large language models].” Guggenheim’s call aligns with consensus on Wall Street. Of the 49 analysts covering Datadog, 44 have a buy or strong buy on the stock, according to LSEG. Shares have fallen 16% in the year to date, underperforming the overall market.
