2 Growth Stocks to Buy With $200 and Hold Forever

Key Points

• Palantir’s AIP is experiencing rapid enterprise adoption.

• Datadog has managed to build a sticky customer base.

• 10 stocks we like better than Palantir Technologies ›

Smart investing is much more about picking high-quality growth stocks and holding them patiently rather than chasing speculative investments and focusing on market timing. The investment journey also doesn't require thousands of dollars or a finance degree. With just $200 (which you don't need to pay bills or for contingencies), you can start building a portfolio of stocks backed by fundamentally strong companies with robust long-term growth prospects.

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Palantir Technologies (NASDAQ: PLTR) and Datadog (NASDAQ: DDOG) are two such companies that fit the bill. Here's why you can consider picking stakes in either of these stocks in 2025.

Palantir Technologies

Data analytics and artificial intelligence (AI) player Palantir is at the forefront of helping government agencies and large corporations derive insights and meaning from vast amounts of data. While the company initially focused on national security, it also expanded into commercial markets.

Palantir's Artificial Intelligence Platform (AIP) is proving to be a significant growth catalyst. AIP integrates large language models with real-world workflows and data systems through Palantir's proprietary ontology (mapping of real-world assets of the clients to digital counterparts). By understanding the data and its relationships in the context of the organization, AIP is better positioned to resolve real-world problems rapidly. Additionally, clients are leveraging AIP not only as another AI-powered software tool but also as foundational infrastructure to build their custom software.

AIP's success has been at the heart of Palantir's financial growth. The company's revenues soared 48% year over year to over $1 billion in the second quarter of fiscal 2025 (ending June 30). U.S. commercial revenues surged 93% year over year to $306 million, while government revenues climbed 53% year over year to $426 million. The company is experiencing a rapid rise in new high-value deals, while existing customers are also increasing their usage once they experience the platform's capabilities. Palantir achieved this success with a relatively small direct sales force, relying instead on satisfied customers to spread the word.

While the commercial business is growing at a quicker pace, government contracts are still a crucial part of Palantir's business. The U.S. Army recently awarded Palantir a 10-year agreement worth up to $10 billion, consolidating 75 separate contracts.

Palantir is also profitable and reported its sixth consecutive quarter of generally accepted accounting principles (GAAP) profitability. But despite the robust growth potential, Palantir's sky-high valuation is making investors concerned. The stock trades at 132 times sales and 277 times forward earnings -- numbers that would make even the most optimistic investor pause.

Yet it may not be wise to dismiss the company based on valuation. Amazon also faced significant criticism as it traded at sky-high valuations. Eventually, though, Amazon's growth potential helped readjust the valuation, and the company proved to be a brilliant pick for long-term investors who purchased in those early "expensive" periods.

Palantir appears positioned for a similar exceptional growth story, with analysts expecting revenues to rise 45.6% in fiscal 2025 and 33% in fiscal 2026. While those growth rates are lower than current levels, they're still impressive for a company with an annual run rate of around $3.4 billion. For investors willing to bet on Palantir's strong tailwinds, the current valuation might prove justified over time.

Datadog

Datadog's cloud monitoring and observability platform is increasingly becoming mission-critical for enterprises tracking their digital infrastructure and applications. As more companies shift to the cloud and adopt advanced AI technologies, it becomes imperative for them to track performance, cost efficiency, and errors in their digital infrastructure.

Datadog is positioned to capitalize on this growing opportunity. This is evident considering the company's solid revenue and earnings performance in the second quarter. Revenues grew 28% year over year to $827 million, primarily driven by increased service usage by existing customers, which included both AI-focused (AI-native) users and the rest of the customers. AI-native users accounted for 11% of Datadog's revenue in the second quarter, up from 8% last quarter.

Datadog's platform strategy has also played a pivotal role in the success of its cross-selling and upselling efforts. At the end of the second quarter, 83% of customers used two or more products, while 52% used four or more. The company's net revenue retention rate was also around 120%. A sticky customer base ensures high revenue visibility.

Datadog is also leveraging AI to strengthen its observability and monitoring platform. The company has launched autonomous AI agents to focus on three areas: investigating and remediating alerts, fixing coding issues, and analyzing security signals without human intervention.

Datadog faces the risk of revenue volatility if its AI-native customers optimize their spending as they mature. Despite the risk, the company appears positioned for continued growth. For investors comfortable with some volatility, Datadog could be a worthwhile pick now.

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Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Datadog, and Palantir Technologies. The Motley Fool has a disclosure policy.