2 stocks benefiting from the growth of AI and cloud technologies

The last few years have seen dramatic changes in the software industry, with cloud technology changing the way companies use software. This transition has led to the development of the software as a service (SaaS) model, which has allowed users to pay for subscriptions instead of buying licenses. Today, however, a new wave of innovation is on the scene: generative artificial intelligence. How this technology evolves remains a question, and how profound the impact will be on the market as a whole. But one thing is clear - changes in the software sector are creating new opportunities.

According to Macquarie analyst Steve Koenig, the current moment is a good point to buy stocks, especially those associated with rapid growth in cloud technology and artificial intelligence. Koenig mentions that growing investments in AI and digitalization open up room for strong gains in the coming years. In this context, he focuses on two stocks that may offer interesting upside potential.

GitLab $GTLB: an AI-powered software development platform with big growth potential

GitLab, known for its focus on software development, security and IT operations, represents one of the potential winners in the AI field. The company offers an AI-powered DevSecOps platform that enables users to efficiently manage the entire software development cycle. GitLab is built on open-source code and uses a freemium model, which means that the basic version of the platform is free, while fully featured versions are sold on a subscription basis.

The GitLab platform integrates tools for development, security and IT operations, simplifying workflow. The AI, which GitLab calls Duo, is included with the subscription and offers real-time assistance to users, detecting potential issues in source code and improving productivity. GitLab has garnered more than 40 million registered users, and according to recent results, has shown strong year-over-year growth and positive cash flow.

Analyst Koenig sees great potential in GitLab, highlighting its extensive growth opportunity due to the breadth and complexity of the platform, which supports a wide range of users and AI workers. Koenig mentions that GitLab is currently favorably valued and its expected earnings may beat market forecasts, which could lead to further upside for the stock in the coming months.

Datadog $DDOG: Leader in data analytics and cloud monitoring

Another company that has strong potential, according to analyst Koenig, is Datadog, a leader in real-time data analytics and cloud monitoring. Datadog provides a platform for monitoring systems and applications and, through the integration of artificial intelligence, offers process automation that significantly speeds up analysis and improves the efficiency of the platform.

The company is known for its tools for SaaS and cloud users and provides a wide range of features that allow companies to monitor the performance of their applications and infrastructure components. Datadog is also developing its own AI tool, Bits, which allows users to interact with the platform using natural language, one example of how generative AI is changing the digital world.

According to Koenig, Datadog is strongly positioned in the fast-growing observability (app tracking) market, as evidenced by its growing market share. Given strong fundamentals and the outlook for continued revenue growth, particularly in AI and cloud monitoring, Koenig recommends Datadog stock as an attractive investment with great potential.

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Source: Tipranks