<p>When it comes to the artificial intelligence (AI) boom, <strong>Nvidia</strong> <span class="ticker-mention inline-flex items-center font-bold">(NVDA <span class="ml-1 text-green-900">+2.33%</span>)</span> is the stock by which all others are measured. The company supplies the semiconductors that enabled the recent advances in AI, and it has been one of the undeniable beneficiaries of the AI revolution. Despite concerns about growing competition, uncertainty about future AI adoption, and economic and geopolitical uncertainty, Nvidia stock has gained 21% thus far in 2026 (as of market close on Wednesday), outpacing both the <strong>S&amp;P 500</strong> and the <strong>Nasdaq Composite</strong>, which have risen by 9% and 14%, respectively.</p>
<p>However, one AI stock is running circles around Nvidia. AI-powered observability and security platform <strong>Datadog</strong> <span class="ticker-mention inline-flex items-center font-bold">(DDOG <span class="ml-1 text-green-900">+2.69%</span>)</span> has risen like a phoenix from the ashes, soaring 51% in 2026, delivering more than double Nvidia's gains.</p>
<p>Let's take a look to see what's driving the recent surge and why there might be more to come.</p>
<div><img alt="Developers looking at lines of AI code on a computer screen. " width="880" height="495" src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84Njk1NzAvZGV2ZWxvcGVycy1sb29raW5nLWF0LWxpbmVzLW9mLWFpLWNvZGUtb24tYS1jb21wdXRlci1zY3JlZW4uanBnJnc9Mzg0MA?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84Njk1NzAvZGV2ZWxvcGVycy1sb29raW5nLWF0LWxpbmVzLW9mLWFpLWNvZGUtb24tYS1jb21wdXRlci1zY3JlZW4uanBnJnc9Mzg0MA"/>
<p>Image source: Getty Images.</p>
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<h2>The tide has turned</h2>
<p>Last year was a challenging one for Datadog investors. One of the biggest issues weighing on the stock was the fear that advances in AI would render traditional software-as-a-service (SaaS) companies obsolete. This was accompanied by decelerating growth for much of the past couple of years, which seemed to confirm investors' worst fears. That all seemed to change at the dawn of 2026.</p><div><div id="foolcom_sidebar_top_container"></div></div>
<p>In the first quarter, Datadog generated revenue that climbed 32% year over year to $1 billion. This marked the company's first $1 billion quarter and its fastest pace of growth in three years. Adjusted earnings per share (EPS) rose 30% to $0.60.</p><div></div>
<p>For context, analysts' consensus estimate called for revenue of $932 million and adjusted EPS of $0.51, so Datadog cleared both hurdles with plenty of room to spare. </p><div><div id="in_line_article_pitch_container"></div></div>
<p>Fueling the results was robust growth among Datadog's most lucrative customers, as those providing annual recurring revenue (ARR) of $100,000 or more rose to 4,550, up 21%.</p>
<section><div><div><div><small><div>Expand</div></small></div><div><img alt="Datadog Stock Quote" width="64" height="64" src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL0RET0cucG5nJnc9MTI4?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL0RET0cucG5nJnc9MTI4"/></div><div><h2>NASDAQ: DDOG</h2><div>Datadog</div></div></div><div><div><div>Today's Change</div><div>(2.69%) $5.38</div><div>Current Price</div><div>$205.32</div></div><div></div></div></div><div><div></div><div><h3>Key Data Points</h3><div><div>Market Cap</div><div>$73B</div><div>Day's Range</div><div>$195.51 - $205.35</div><div>52wk Range</div><div>$98.01 - $205.44</div><div>Volume</div><div>150K</div><div>Avg Vol</div><div>5.5M</div><div>Gross Margin</div><div>79.86%</div></div></div></div></section>
<p>The company's cash generation was also robust, with operating cash flow of $335 million and free cash flow of $289 million, which rose 23% and 18%, respectively.</p>
<p>One of the biggest developments of the quarter was the launch of GPU monitoring. Businesses are adopting AI at a rapid pace, but concerns about return on investment (ROI) remain. Datadog helps businesses optimize spending and performance as they scale their AI projects by monitoring the health, cost, and performance of their GPUs. Customers also benefit from faster troubleshooting and greater cost savings from their AI investment, which, in many cases, is substantial.</p>
<p>It isn't surprising, then, that Datadog landed several large AI-centric deals during the quarter, including numerous six-, seven-, and eight-figure annualized deals. A couple were notable, with &#34;two of the world's largest technology companies ... building and training the most advanced AI models in the world.&#34; By using Datadog's tools, they were able to &#34;accelerate the pace of innovation on their hyperscale AI training workloads,&#34; according to management. </p>
<p>After its blockbuster financial report, Datadog raised its full-year forecast. The company is now guiding for revenue of $4.32 billion and adjusted EPS of $2.40 at the midpoint of its guidance. This is a substantial increase from its previous guidance, which called for revenue of $4.08 billion and adjusted EPS of $2.12.</p>
<section><div><div><div><small><div>Expand</div></small></div><div><img alt="Nvidia Stock Quote" width="64" height="64" src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL05WREEucG5nJnc9MTI4?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vYXJ0L2NvbXBhbnlsb2dvcy9tYXJrL05WREEucG5nJnc9MTI4"/></div><div><h2>NASDAQ: NVDA</h2><div>Nvidia</div></div></div><div><div><div>Today's Change</div><div>(2.33%) $5.14</div><div>Current Price</div><div>$225.92</div></div><div></div></div></div><div><div></div><div><h3>Key Data Points</h3><div><div>Market Cap</div><div>$5.5T</div><div>Day's Range</div><div>$221.56 - $227.84</div><div>52wk Range</div><div>$129.16 - $227.84</div><div>Volume</div><div>5.2M</div><div>Avg Vol</div><div>170M</div><div>Gross Margin</div><div>71.07%</div><div>Dividend Yield</div><div>0.02%</div></div></div></div></section>
<h2>Not apples-to-apples</h2>
<p>To be fair, this clearly isn't an apples-to-apples comparison. Datadog generated $1 billion in quarterly revenue for the first time, while Nvidia makes that much in a couple of days. Furthermore, Nvidia outlook calls for 77% revenue growth, which dwarfs Datadog's forecast for 30% growth. It <em>does</em>, however, illustrate an important point. As AI adoption moves further downstream, investors are following suit, looking for the next generation of AI winners. Those with good prospects are being amply rewarded. </p>
<p>Datadog appears to have cracked the code for helping customers join the AI revolution and get a greater ROI. In doing so, the company has dispelled the notion that its services will be disrupted by AI.</p>
<p>Wall Street is squarely on board. In May, 92% of analysts who issued an opinion on Datadog rate the stock a buy or strong buy, and none recommend selling. Furthermore, in the wake of the company's blockbuster quarter, analysts scrambled to update the price targets as the stock continues to gain ground. Datadog is already closing in on the average price target of $220, which represents potential upside of about 7% (as of this writing).</p>
<h2>Is the stock a buy?</h2>
<p>That leads us to the quintessential investing question: Is Datadog stock a buy? On the heels of its eye-catching quarter, investors have flocked back to Datadog stock, which soared 95% over the past month (as of this writing). That price spike has brought a commensurate increase in the stock's valuation. At 72 times next year's expected earnings, Datadog is &#34;fetching&#34; a premium.</p>
<p>Value investors will no doubt balk at the company's pricey multiple, while growth investors may be game. For those still interested, buying a small position as part of a balanced portfolio is likely the right approach, while looking for opportunities to add at better value points over time.</p>
<p>As a longtime Datadog shareholder, I'll be watching to see if the company's accelerating growth continues.</p><div id="article_pitch_container"></div><div id="promobox_container"></div>

DDOG

NVDA

NVDL

NVDU

DOGD

<p>Nvidia has been a key player in the AI boom, with its stock rising 21% in 2026. However, Datadog has outperformed it, soaring 51% this year. Datadog's recent success is attributed to a strong Q1, where revenue grew 32% to $1 billion, and adjusted EPS rose 30%. The company launched GPU monitoring, aiding businesses in optimizing AI investments. Analysts are bullish on Datadog, with 92% rating it a buy. Following its strong performance, Datadog raised its full-year revenue forecast to $4.32 billion, indicating robust growth prospects in the AI sector.</p>

- Nvidia remains a benchmark for AI stock performance, achieving a 21% gain in 2026 amid rising competition and uncertainty.  
- In contrast, Datadog has surged 51% in the same period, driven by strong quarterly revenue growth of 32% to $1 billion and successful AI-focused deals.  
- Datadog's robust financial performance has led to raised forecasts, while investor sentiment is overwhelmingly positive, with 92% of analysts rating the stock as a buy.

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Meet the AI Stock Running Rings Around Nvidia in 2026. It Could Just Be Getting Started