Key Takeaways
- The Nasdaq Composite has entered a new bull market, with a history of returning 31% annually since 1990.
- Meta Platforms and Datadog are two AI stocks with significant upside potential, with median target prices implying 29% and 62% gains, respectively.
- Meta Platforms is strengthening its advertising business with AI tools and has a median target price of $840 per share.
- Datadog is a leader in observability software, critical for AI applications, and has a median target price of $216 per share.
- The stocks offer opportunities for patient investors, with Meta trading at 29 times earnings and Datadog trading at 15 times sales.
Introduction to the Nasdaq Composite
The Nasdaq Composite, a technology-heavy index, has recently entered a new bull market, following a brief drop into bear market territory last year. According to historical data, since 1990, the Nasdaq has been through six other bull markets, with an average duration of five years and an average annual return of 31%. This suggests substantial upside potential in 2026. As the article states, "The Nasdaq has been through six other bull markets since 1990. The average one lasted for five years, during which the index returned 31% annually." This historical trend is encouraging for investors looking to capitalize on the growth of AI-driven stocks.
Meta Platforms: A Leader in Advertising
Meta Platforms, the owner of three of the four most popular social media networks, has been investing heavily in artificial intelligence (AI) product development. The company’s efforts have led to deeper engagement and better ad performance, allowing it to charge more per ad impression. As the article notes, "Meta has been spending heavily on artificial intelligence (AI) product development. Custom chips reduce its dependence on costly Nvidia GPUs, proprietary machine learning models personalize the user experience, and AI creative tools automate campaign workflows for brands." With a median target price of $840 per share, implying 29% upside, Meta Platforms is an attractive opportunity for investors.
Datadog: A Leader in Observability Software
Datadog, a leader in observability and security software, has embedded its products with machine learning capabilities. The company’s Watchdog AI engine proactively detects anomalies, surfaces alerts, and automates root cause analysis. As the article states, "Datadog develops observability and security software that helps enterprises monitor the performance of critical applications and infrastructure. The company has embedded its products with machine learning capabilities." With a median target price of $216 per share, implying 62% upside, Datadog is a compelling investment opportunity.
Financial Performance and Valuation
Both Meta Platforms and Datadog have reported solid financial results in the third quarter, with revenue increases of 26% and 28%, respectively. Meta Platforms’ GAAP net income increased 20% to $7.25 per diluted share, while Datadog’s non-GAAP earnings increased 20% to $0.55 per diluted share. In terms of valuation, Meta Platforms trades at 29 times earnings, while Datadog trades at 15 times sales, a discount to its three-year average. As the article notes, "Meta trades at 29 times earnings, a very reasonable price for a company whose earnings increased 20% in the most recent quarter."
Investment Opportunities and Risks
While Meta Platforms and Datadog offer significant upside potential, investors should consider the risks associated with investing in the stock market. As the article cautions, "Before you buy stock in Meta Platforms, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of them." However, for patient investors, these stocks may provide substantial returns. As Trevor Jennewine, a Motley Fool contributor, notes, "The 10 stocks that made the cut could produce monster returns in the coming years."
Conclusion
In conclusion, the Nasdaq Composite’s entry into a new bull market, combined with the growth potential of AI-driven stocks like Meta Platforms and Datadog, presents an attractive investment opportunity. With median target prices implying significant upside, these stocks are worth considering for patient investors. As the article states, "History says the Nasdaq will soar in 2026: 2 AI stocks to buy now, according to Wall Street." By investing in these stocks, investors may be able to capitalize on the growth of the AI industry and achieve substantial returns.
https://finance.yahoo.com/news/history-says-nasdaq-soar-2026-103000694.html