Seizing the Dip: Why These AI-Powered Stocks Could Stage a Comeback in 2026

The AI rally that’s propelled the S&P 500 throughout 2025 hasn’t lifted all boats equally. While mega-cap tech leaders have dominated headlines, two compelling opportunities have emerged among growth stocks now trading at steep discounts. The Trade Desk (NASDAQ: TTD) and DataDog (NASDAQ: DDOG) have both faced significant headwinds recently, but their underlying fundamentals suggest they could deliver strong returns when sentiment shifts.

The Trade Desk: Navigating Competitive Disruption

The Trade Desk has endured a rough 2025, with its stock down 73% from recent peaks. The company stumbled out of the gate with Q4 earnings that missed guidance substantially—management blamed an unusually aggressive reorganization and the Kokai platform migration. But the weakness extended beyond one quarter. Through the first three quarters of 2025, revenue growth decelerated to 20%, a sharp step down from 27% in the prior-year period.

The core concern driving the sell-off centers on Amazon’s aggressive entry into connected-TV advertising. The e-commerce giant is undercutting pricing and securing major deals with Netflix and Disney, ostensibly encroaching on The Trade Desk’s territory. CEO Jeff Greene argues this misses the bigger picture: Amazon and other walled-garden operators focus on their proprietary inventory, while The Trade Desk operates across the open internet. Its AI-driven algorithms, trained on diverse advertiser and inventory datasets, provide performance advantages competitors struggle to match.

Even accounting for potential market share losses, the “open internet” advertising space remains a high-growth arena. The Trade Desk should sustain mid-teens revenue expansion for years while gradually expanding operating margins. At a forward P/E under 21 and EV-to-sales below 6, the stock appears significantly undervalued heading into 2026, setting the stage for a meaningful turn around.

DataDog: Temporary Turbulence, Durable Growth

DataDog delivered impressive third-quarter results in November, but the stock’s subsequent collapse—down 30% since earnings—has created an attractive entry point. Insider selling at elevated prices and competitive pressure from Palo Alto Networks’ acquisition of Chronosphere clearly rattled sentiment. However, these factors likely reflect short-term noise rather than fundamental deterioration.

The earnings picture tells a different story. Q3 revenue jumped 28%, while remaining performance obligations—a key forward-looking metric—surged 53%, signaling robust visibility into 2026 growth. More importantly, DataDog is capturing secular tailwinds in AI observability. The company now serves over 500 native AI customers monitoring large language models and generative AI applications. Management disclosed a nine-figure contract win with a leading AI firm and is witnessing strong traction from its BitsAI agents, which can diagnose issues and propose code fixes for engineers.

The structural tailwind remains compelling: as enterprises increasingly migrate workloads to cloud platforms and adopt cloud-native tools, they generate exponentially more data requiring sophisticated observability solutions. This expansion of the total addressable market keeps DataDog’s growth runway extended well beyond 2026.

Yes, at a forward P/E of 69 and price-to-sales of 14, DataDog commands a premium. But for a company with 28% revenue growth and accelerating future obligations, that valuation may prove modest when sentiment reverses. The current pullback offers a compelling opportunity to initiate or add to positions before the next leg higher.

The Opportunity Window

Both stocks have delivered near-term pain—73% and 30% declines respectively—yet possess durable competitive advantages and favorable long-term growth dynamics. As market focus inevitably shifts from short-term headwinds to multi-year earnings power, these names appear poised to turn around in 2026. Investors with conviction in AI’s staying power and growth infrastructure may find this dislocation worth exploiting.