The AI Revolution: Which Stock Will Reign Supreme?
Datadog and Snowflake: Two AI Powerhouses
Datadog and Snowflake are two companies that have revolutionized the way businesses operate with their AI-powered applications. Datadog’s diagnostic data collection and Bits AI platform simplify IT diagnostics, while Snowflake’s cloud-based data warehouse and Cortex AI platform enable companies to analyze and build their own AI applications.
A Tale of Two Stocks
Both Datadog and Snowflake reached all-time highs in late 2021, only to lose their luster as growth cooled and interest rates rose. Today, they trade 36% and 71% below their record highs, respectively. But should you still invest in these AI leaders?
Datadog’s Impressive Growth
Datadog’s revenue grew at a staggering 67% CAGR from 2019 to 2022, with its number of large customers more than tripling. Its dollar-based net retention rate remained above 130% throughout 2022. Although growth slowed in 2023, the company aggressively cut spending and turned profitable on a GAAP basis. Analysts expect revenue to grow at a 24% CAGR from 2023 to 2026.
Snowflake’s Slowing Growth
Snowflake’s revenue soared at a 98% CAGR from fiscal 2020 to fiscal 2023, but slowed to 36% in fiscal 2024. Its customer base more than tripled, but its net revenue retention rate dropped to 131%. The company faces stiff competition and macro challenges, and analysts expect revenue to grow at a 24% CAGR from fiscal 2024 to fiscal 2027.
Which Stock Reigns Supreme?
Datadog looks pricier than Snowflake, but its growth is more stable, its profits are soaring, and its CEO remains at the helm. Snowflake’s persistent losses and insider selling raise concerns about its business model. While both companies have room to grow in the AI market, Datadog appears to be the better buy.
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