Capital investment in artificial intelligence (AI) contributed over one percentage point to U. S. economic growth in the first half of 2025, overtaking consumer spending as the main growth driver. Evercore analyst Julian Emanuel describes AI as the most transformative technology since the internet, signaling a prolonged bull market. Morgan Stanley analysts predict AI-related sales in cloud and software sectors will surge over 600%, exceeding $1 trillion annually by 2028. Investors can capitalize on this trend by buying shares in Alphabet (GOOGL, GOOG) and Datadog (DDOG). Analyst outlooks are broadly positive: among 73 analysts, Alphabet’s median target price is $330 per share, implying a 19% potential gain from its current $278 price. Among 46 analysts, Datadog’s median target price stands at $170 per share, indicating a 10% upside from its current $155 price. Below is a detailed overview of these AI-focused stocks. 1. Alphabet Alphabet commands the largest adtech market globally by engaging users and collecting consumer data via platforms like Google Search and YouTube. Although the search market is shifting towards AI tools like Perplexity and ChatGPT, Alphabet embraces this movement with its own generative AI technologies. Google also operates the third-largest public cloud infrastructure and platform services (CIPS), contributing 13% of CIPS revenue in Q3, up by one percentage point since year-start. Recognized as a leader in AI infrastructure and large language models, Google is poised to expand its market share amid rising AI demand. In Q3, Alphabet reported strong financial results surpassing estimates, with revenue climbing 16% to $102 billion—an acceleration from last year’s 15% growth—and GAAP earnings growing 35% to $2. 87 per diluted share.

CFO Anat Ashkenazi emphasized robust demand for AI infrastructure, highlighting interest in custom chips and Gemini AI models. Wall Street forecasts a 15% annual earnings growth for Alphabet over the next three years, justifying its current price-to-earnings ratio of 27. Investors may consider adding a modest position in this AI stock. Key Data for Alphabet: - Current Price: $277. 35 - Market Cap: $3. 436 trillion - Day’s Range: $275. 20 - $283. 78 - 52-Week Range: $140. 53 - $291. 59 - Volume: 691K (Avg. 34M) - Gross Margin: 59. 18% - Dividend Yield: 0. 00% 2. Datadog Datadog specializes in observability software encompassing around two dozen products that help enterprises monitor IT infrastructure and application performance. Its AI engine, Watchdog, automates anomaly detection, incident alerts, and root cause analysis, enabling faster issue resolution for operations teams. The AI revolution is expected to drive Datadog’s growth. Forrester Research recognized it as a leader in AI for IT operations—a sector relying on automation to maintain enterprise software and services. Gartner also acknowledged Datadog as a leader in observability platforms, noting its support for generative AI workloads. Datadog’s Q2 results beat expectations, with revenue rising 28% to $827 million and non-GAAP earnings up 7% to $0. 46 per share. CEO Olivier Pomel highlighted growth in AI-powered agents that automate incident response, coding, and security triage. Wall Street expects Datadog’s adjusted earnings to grow 19% annually through 2028, making its current valuation at 84 times earnings seem high. However, the company has outperformed earnings estimates by an average of 15% over the last six quarters and plans to focus on cost savings while reducing R&D spending gradually. Investors with a time horizon of three to five years may find it prudent to buy a small stake now and consider increasing their position by 15% or more if the stock price declines. In summary, both Alphabet and Datadog present compelling AI-driven investment opportunities amid rapidly growing market demand, backed by strong financial performance and analyst confidence.