- The stock market has been a mixed bag for technology companies so far in 2025.
- Certain AI-focused companies experienced significant stock declines year-to-date, presenting potential buying opportunities.
- Investors looking to buy the dip may find value in these two tech companies currently trading well below their recent highs.
- Looking for actionable trade ideas to navigate the current market volatility? Subscribe here to unlock access to InvestingPro’s AI-selected stock winners.
As we navigate through 2025, the landscape of technology stocks presents both challenges and opportunities amid the recent market correction. Among the notable contenders are Block (NYSE:XYZ) and Datadog (NASDAQ:DDOG), both down significantly from the start of the year yet poised for a comeback.
With macroeconomic conditions showing signs of improvement and secular trends like cloud adoption and digital payments working in their favor, these stocks appear primed for a recovery.
For investors with a long-term horizon, buying these AI-driven innovators at their current discounted valuations could be a savvy move before they soar again.
1. Block: Financial Innovation Through AI
Block, formerly known as Square, has transformed from a simple payment processor into a financial ecosystem leveraging artificial intelligence across its product suite. The company operates two main segments: Square for merchants and Cash App for consumers, both increasingly powered by AI capabilities.
Source: Investing.com
Despite its innovation, Block’s stock has tumbled approximately 28% year-to-date in 2025, significantly underperforming the broader market. Even worse, shares are almost 40% below a recent 52-week peak of $99.25.
This decline stems largely from investor concerns about fintech valuations and increasing competition in the digital payments space. Additionally, Block’s significant Bitcoin holdings and cryptocurrency initiatives have faced headwinds as crypto markets experienced volatility in early 2025.
However, Block’s AI integration presents compelling reasons for optimism. The Jack Dorsey-led company has been implementing machine learning algorithms to enhance fraud detection, improve lending decisions for its Square Capital business, and personalize the user experience across its platforms. These AI initiatives are expected to drive operational efficiencies and expand margins over time.
Source: InvestingPro
Block’s Fair Value price sits at $86.98, as per the quantitative models in InvestingPro, suggesting a potential upside of 41.8% from current levels. The company’s return on equity of 5.6% demonstrates its ability to generate profits from shareholder investments, albeit at modest levels currently.
Analysts project EPS to reach $3.62 in FY2025, representing significant growth, with revenue expected to increase by 11.2%. While Block doesn’t pay a dividend, its strong cash position provides flexibility for future investments in AI and other growth initiatives.
2. Datadog: AI-Powered Observability Platform
Datadog, a leading cloud monitoring and analytics platform, has established itself as a critical infrastructure provider for companies navigating digital transformation. The company offers infrastructure and application performance monitoring, log management, and security monitoring tools that help businesses ensure their digital operations run smoothly.
Source: Investing.com
Despite its essential role in the modern tech stack, Datadog has seen its stock fall by about 23% in the year-to-date. Even more alarming, shares are down 35% from their recent high of $165.
This downturn can be attributed to several factors, including concerns about tech spending amid economic uncertainty, valuation pressures on high-growth tech stocks, and some profit-taking following strong gains in previous years.
However, Datadog’s AI capabilities represent a significant competitive advantage. The company has been integrating artificial intelligence throughout its platform to help customers detect anomalies, predict potential issues before they occur, and automate incident response. Datadog’s healthy cash flow and improving profitability further bolster the case for a rebound, as does its status as a potential S&P 500 candidate, which could attract institutional buying.
Source: Investing.com
Datadog’s consensus analyst recommendation is a "Strong Buy" with a mean price target of $159.48, suggesting a potential upside of 44.2% from current levels. The most optimistic analysts see the stock reaching as high as $230, representing over 100% upside potential.
Datadog’s financial health is rated as "GOOD" by InvestingPro, indicating solid fundamentals despite the recent stock performance. The company’s growth trajectory remains impressive, with revenue increasing by 26.1% in FY2024 to reach $2.68 billion. Analysts project continued strong growth, with revenue expected to increase by 18.9% in FY2025.
Conclusion
While Block’s and Datadog’s recent stock performances reflect broader market challenges and company-specific concerns, their strategic investments in AI and innovative technologies position them favorably for future growth.
Investors with a long-term perspective may find the current price dips an opportune moment to consider these AI-focused companies before they potentially rebound and soar in value.
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Disclosure: At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF (SPY), and the Invesco QQQ Trust ETF (QQQ). I am also long on the Invesco Top QQQ ETF (QBIG), Invesco S&P 500 Equal Weight ETF (RSP), and VanEck Vectors Semiconductor ETF (SMH).
I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.