Artificial intelligence is the hottest sector on Wall Street right now. Indeed, it seems like every day, a new AI startup is popping up. These startups have had no trouble attracting huge sums of venture capital funding in 2024. Just look at Hebbia, which raised $130 million at a $700 million valuation in July. Or, there’s Bright Machines, which secured $126 million in June. Investors have been rewarding almost any company that even mentions AI. But it’s still true that the stocks delivering the most growth have seen their share prices skyrocket.
That said, I think the tides may be starting to turn.
Recently, tech stocks suffered a massive $1 trillion selloff, with the Nasdaq plunging 3.6% in a single day. This was its worst decline since October 2022. In this shifting environment, I believe it pays to focus on more established companies that are still growing sales rapidly.
I’m zeroing in on three AI stocks that are all delivering what’s known as “hypergrowth.” I define hyper growth stocks as ones that have increased revenue more than 30% annually over the past three years. Let’s dive into these names, and see if they’re a fit for your portfolio!
Datadog (DDOG)
Datadog (NASDAQ:DDOG) provides a monitoring and analytics platform for developers and IT teams. The company recently announced strong Q1 2024 results, with revenue growing 27% year-over-year to $611 million. I believe Datadog is well-positioned to continue its impressive growth trajectory. The booming cloud computing and data analytics industries are key tailwinds propelling the company forward. Despite chatter of a potential cloud slowdown, companies in this space continue to post stellar numbers. That gives Wall Street a lot of confidence in DataDog and its peers.
Analysts maintain a consensus strong buy rating on the stock, with price targets as high as $165 per share suggesting significant upside potential. Longer-term, earnings per share are projected to jump from $1.60 in 2024 to $13 by 2033. Additionally, revenue is expected to surge from $2.6 billion to over $14 billion in the same period.
Of course, these are estimates, and growth could decelerate if the AI hype train slows. But for investors seeking a hypergrowth AI play, I believe Datadog remains a compelling option. The company continues to innovate and recently launched products like Bits AI for Incident Management and Event Management.
GitLab (GTLB)
GitLab (NASDAQ:GTLB) provides a comprehensive DevSecOps platform that enables organizations to deliver software efficiently. The company has been making waves lately with its impressive financial performance and the transformative impact of AI on its operations.
In the first quarter of fiscal year 2025, GitLab reported quarterly revenue of $169.2 million, a 33% increase compared to the same quarter the prior year. Unfortunately, these results have not lifted the stock considerably higher thus far.
Regardless, I believe that GitLab is perfectly-positioned to benefit from the AI revolution that is sweeping through the software development industry. AI has completely changed the coding landscape, making developers massively more productive. Companies with large code repositories, like GitLab, stand to gain the most from this trend. AI companies are eagerly seeking coding data to create more powerful models, and I wouldn’t be surprised if a Big Tech giant eventually acquires GitLab for a premium as it explores a sale.
Upstart (UPST)
Upstart (NASDAQ:UPST) is an AI lending marketplace that has faced challenges in recent years due to high interest rates and banks’ hesitancy in adopting new technologies. The company’s lending activity has slowed considerably, but I believe the company’s current problems are more related to the broader banking sector and macroeconomic conditions than Upstart itself.
I see potential in Upstart, especially when it’s trading at a weak point. As interest rates are expected to decrease in the coming months, borrowing and lending activity should pick up, and banks may become more willing to partner with Upstart. It’s a risky play, but the company is projected to reach profitability in 2025, along with impressive top-line growth.
Opinions vary widely on UPST stock, with the most recent analyst ratings from Jeffries, BTIG, Redburn Atlantic, and Mizuho implying significant downside.
Despite the bearishness, I believe Upstart’s AI-powered lending platform has the potential to disrupt the traditional lending industry. As economic conditions improve and banks become more receptive to AI technologies, Upstart could be well-positioned for growth. I think this is a stock that’s worth keeping an eye on. It’s one of the only AI companies that is hypergrowth and is nearing profitability, despite the stock’s struggles.
On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.