The AI trade has produced plenty of winners over the last two years. But in 2026, one software stock is quietly leaving some of Big Tech’s biggest AI names in the dust. Datadog, Inc. (NASDAQ:DDOG) shares have surged nearly 66% year-to-date, dramatically outperforming Microsoft Corp (NASDAQ:MSFT), Adobe Inc. (NASDAQ:ADBE), Snowflake Inc. (NYSE:SNOW) and ServiceNow, Inc. (NYSE:NOW) — all of which remain sharply negative for the year despite continued AI optimism across Wall Street.
Microsoft is down roughly 13% in 2026. Adobe has plunged nearly 29%, while ServiceNow and Snowflake have fallen more than 30% and 19%, respectively. Datadog, meanwhile, keeps climbing.
And JPMorgan doesn’t think the rally is over yet.
The bank currently carries an Overweight rating on the stock alongside a $320 price target, implying roughly 43% upside from recent levels near $224.
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AI Infrastructure Spending Is Creating A New Winner
Unlike many AI-linked software names still trying to prove monetization, Datadog is increasingly benefiting from a very specific trend: AI workloads are making cloud systems dramatically more complex.
That complexity creates more demand for observability, monitoring and cloud infrastructure analytics — exactly where Datadog operates.
As enterprises deploy larger AI models and AI agents across workflows, monitoring performance, latency, security and infrastructure reliability becomes significantly harder. And investors increasingly view Datadog as one of the clearest software beneficiaries of that shift.
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The company’s latest earnings only reinforced that narrative.
Datadog recently crossed $1 billion in quarterly revenue for the first time while delivering stronger-than-expected growth and raising guidance. AI-native customers and enterprise AI deployments have increasingly become central themes in the company’s growth story.
While AI Software Struggles, Datadog Keeps Running
What makes Datadog’s rally stand out even more is the broader backdrop across AI software.
Many of the market’s largest AI software names have struggled in 2026 as investors rotated away from expensive growth stocks amid concerns around valuations, monetization timelines and enterprise spending.
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But Datadog has largely avoided that pressure.
Instead, the stock is increasingly being treated less like a speculative AI trade and more like a direct infrastructure beneficiary of rising AI adoption.
That distinction matters.
Because while companies like Microsoft and Adobe are still building long-term AI monetization stories, Datadog is already seeing immediate demand tied to AI-driven cloud complexity.
And JPMorgan’s bullish target suggests Wall Street may believe the market still hasn’t fully priced that in.
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