Datadog (DDOG) Sees Bullish Analyst Stance Amid Strong AI and Observability Momentum Despite Recent Stock Pullback

With significant hedge fund interest and upside potential, Datadog, Inc. (NASDAQ:DDOG) secures a spot on our list of the 15 best AI stocks to watch in December 2025.

As of December 8, 2025, roughly 90% of analysts remain bullish on Datadog, Inc. (NASDAQ:DDOG) with a median price target of $219.00. The consensus projected price target implies 41.95% upside.

Meanwhile, a recent analyst update on Datadog, Inc. (NASDAQ:DDOG) came from Robert W. Baird’s analyst William Power on November 24, who reiterated a “Buy” rating with a $220 price target. This update comes despite recent stock volatility, with the company’s share price declining 23.61% in the past month.

The company’s resilience in the observability market was highlighted by Power, who noted that competitive noise, including PANW’s acquisition of Chronosphere, has had no impact on Datadog, Inc. (NASDAQ:DDOG)’s position. AI players’ heavy reliance on the company’s monitoring capabilities was cited by the analyst, who pointed to a significant contract extension with a major AI customer, widely believed to be OpenAI, as supporting evidence. Meanwhile, the analyst sees the recent pullback as a compelling entry point, expressing optimism about the company’s consistent growth across both AI and non-AI customer segments.

Building on this momentum, Datadog, Inc. (NASDAQ:DDOG) unveiled a range of AI, observability, and security products at AWS re:Invent on December 3, alongside a new Strategic Collaboration Agreement (SCA) with AWS. With this expanded partnership, both companies look to deepen joint solution development, enhance marketplace reach, and introduce advanced tools, including LLM observability, automated remediation, and cloud cost-optimization features. These tools will help enterprises manage increasingly complex, AI-driven cloud environments.

Providing a unified SaaS platform for observability and cloud security, Datadog, Inc. (NASDAQ:DDOG) integrates monitoring, logging, application performance insights, and AI-driven tools. With this, it helps organizations manage and secure complex cloud environments in real time.

While we acknowledge the potential of DDOG as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.