Artificial intelligence (AI) stocks have been having a challenging 2025 as some investors decide to book profits after the stellar performance of these companies in 2023 and 2024. This isn’t entirely unexpected given the uncertainty surrounding the tariff-fueled trade war and concerns about AI spending directions following the release of DeepSeek’s cost-effective AI model earlier this year.
However, many investors and experts believe that AI adoption is still in its infancy and is poised for significant growth in the long run. Analysts at Goldman Sachs predict that AI technology could boost global gross domestic product (GDP) by $7 trillion, or 7%, over time. McKinsey’s estimates are even more ambitious, projecting AI’s contribution to the global economy to be between $17.1 trillion and $25.6 trillion annually.
AI Stocks with Potential
For those who remain optimistic about AI’s future, now could be the perfect time to consider investing in two AI stocks with the potential to soar in the latter half of 2025 and beyond.
Datadog
Datadog (NASDAQ: DDOG) specializes in monitoring, troubleshooting, and evaluating performance, safety, and security for cloud-based applications, a process it refers to as observability. The company has seen increased customer interest in “next-gen AI observability and analysis.”
– Market Cap: $40B
– Current Price: $116.72
– 52wk Range: $81.63 – $170.08
Datadog’s Bits AI is a generative AI assistant that extracts insights from observability and security data generated on its platform. Recent enhancements allow Bits AI to autonomously investigate alerts and coordinate responses without human oversight.
During the latest earnings conference, CEO Olivier Pomel highlighted that over 4,000 customers used one or more Datadog AI integrations. This figure has doubled year-over-year, and the number of customers deploying its LLM observability solution has also doubled in just six months. Notably, AI-specific customers contributed 6 percentage points to the company’s year-over-year revenue growth last quarter.
According to Straits Research, the LLM market is projected to grow at an annual rate of 34% through 2033. Furthermore, MarketsandMarkets research anticipates that annual revenue from AI services in the cloud will quadruple between 2024 and 2029.
Datadog’s cloud-based observability and monitoring demand is expected to increase thanks to AI, and the company has raised its full-year forecast for 2025. Analysts also predict an acceleration in its revenue growth. If Datadog exceeds analysts’ expectations, it could positively impact its stock price. The company’s stock has already seen a nearly 16% increase in the past month, indicating further potential upside.
Confluent
Confluent (NASDAQ: CFLT) has faced a challenging market in 2025, losing nearly 19% of its value due to less-than-impressive quarterly results and cautious guidance amid macroeconomic uncertainties. Despite a revenue and earnings boost, investors sold off the stock.
– Market Cap: $8B
– Current Price: $23.21
– 52wk Range: $17.79 – $37.90
Confluent’s cloud-based data-streaming platform plays a crucial role in AI’s proliferation. It facilitates real-time data access, storage, management, and processing, making it attractive to companies developing generative AI applications.
Confluent’s real-time data capabilities enable customers to create real-time databases for generative AI and agentic AI applications. This feature is essential as the underlying LLMs rely on continuous data streams. Investors may want to consider purchasing the stock after its recent decline, as the business is expected to gain momentum with improving AI adoption.
Despite macroeconomic challenges, Confluent’s customer base grew by 20% year-over-year, ending the first quarter with 6,140 customers. Existing customers continue to spend more, maintaining a healthy dollar-based net retention rate of 117%.
Earnings growth is expected to accelerate from 24% this year to 31% in 2026, according to consensus analyst estimates. This growth could arrive sooner as the company’s customer base expands and AI-related cross-selling opportunities increase.
Confluent’s actual results could surpass its conservative guidance, potentially leading to a stock price increase. The stock has a 12-month price target of $28, representing a 28% increase from current levels. This target could be achievable with improved growth rates in the second half of 2025.
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