The Bear Market Is Over: Two Artificial Intelligence (AI) Growth Stocks Are Down 35% and 57%, and You'll Regret Not Buying on the Way Down

Benchmarking, 2022Standard & Poor's 500The index plunged more than 20% from its all-time high, officially entering a bear market. But it fully recovered its losses and reached a new all-time high in late 2023, which put the bear market into a period of hibernation. Now that the bulls are firmly in control, the S&P 500 continues to move higher in 2024, up 9.7% to date.

But some stocks have yet to return to their best levels in history. For example, many software stocks surged during the height of the pandemic as investors prepared for a home economy, but then plummeted when things returned to normal.

Datadog (NASDAQ resonance stock code: DDOG)respond in singingAtlassian (NASDAQ resonance stock code: TEAM)Two good examples of this are Koon, which have recovered from their 2022 lows but are still 35% and 57% below their all-time highs. Even though their share prices have risen from their 2022 lows, they are still 35% and 57% below their all-time highs, and here are some of the reasons why they are likely to gain more this year and beyond.

1. Data Dog

Businesses must adapt to an increasingly digital world where consumers value convenience above almost anything else. Tech GiantsMicrosoft respond in singingAmazonOperate centralized data centers that lease processing power to enterprises to help them run their online sales channels and customer profiles at a low cost. This approach is known as cloud computing.

But cloud computing also brings complexity. Selling products in a physical store is simple because there is always an attendant on hand to monitor the sales process and assess customer satisfaction. The digital sales channel has a blind spot. A business may not realize that its website is not working for a particular customer base in a particular part of the world until it has lost all of its revenue.

Datadog's cloud-based monitoring platform monitors the infrastructure of more than 27,300 organizations around the clock, enabling immediate management of technical issues so they can be corrected before they jeopardize the sale of the business.

Datadog recently launched an artificial intelligence (AI) virtual assistant called Bits AI to help organizations get more value from their cloud monitoring platforms. It uses conversational noodles designed to help officers investigate and solve problems faster. Where Datadog discovers an event, Bits AI can immediately write a summary and post the information to the employee chat channel, saving Koon's time.

Datadog is also expanding in the area of曏 AI developer monitoring. It offers new tools to track the performance and characteristics of Large Language Models (LLMs) to drive better results for Bubbles customers, and it provides visibility tools for users of off-the-shelf LLMs, such as OpenAI, to help organizations track cost of use.

The company generated record revenues of $2.1 billion in 2023, up 27% from 2022, and realized a modest profit of $48.5 million, a welcome change from the previous year's net loss of $50.1 million. This result demonstrates Datadog's ability to maintain strong growth while managing costs prudently and profitably.

Artificial intelligence could drive significant long-term growth for Datadog, much like cloud computing has already achieved, especially as the rate of AI adoption by businesses accelerates. Currently, AI developers account for only 3% of the company's annual recurring revenue, but investors should expect this number to grow rapidly.

2. Atlas

Atlassian is the developer of Jira and Confluence, popular collaboration software tools used by more than 302,000 organizations worldwide. The company continues to expand its portfolio of products and, with the help of artificial intelligence, is poised for strong long-term growth.

Jira is a project management platform used by software developers to create workflows and track bugs and updates. Confluence is used more broadly because it is designed to help teams collaborate on all aspects of an organization's operations. Employees can use it to brainstorm, discuss strategy, and make critical decisions. In addition, teams can create dedicated workspaces to separate their content from the rest of the organization.

Last year, Atlassian released an AI assistant developed with its own and OpenAI's AI models. Called Atlassian Intelligence, it can draft content and aggregate text to speed up collaboration on Jira and Confluence. It can also act as a virtual agent, serving both customers and employees, which can lead to significant cost savings for organizations in the long run.

Atlassian acquired Loom, a screencasting and artificial intelligence platform, last year for $975 million, allowing users to quickly create screencasts and screen recordings that they can now attach to posts in Jira and Confluence. Text alone makes it difficult to convey clear instructions, so Loom adds important visual elements to eliminate communication misunderstandings, and provides artificial intelligence tools to help users quickly mass aggregate audio content, eliminate silent pauses, and add chapter tags.

In the second quarter of fiscal year 2024 (ended December 31), Atlassian's quarterly revenue exceeded $1 billion for the first time in its history. This marks a year-over-year increase of 21.51 TP3T, a slowdown from previous quarters, primarily due to the company's ongoing prudent cost management efforts to improve profitability.Atlassian's second-quarter loss remained at $84 million, but was a significant reduction of 591 TP3T from the $205 million net loss in the same period last year.

As in the case of Datadog, AI will likely be the micro-driver of Atlassian's dramatic growth in the long run. For example, Atlassian Intelligence is only available for Jira and Confluence's Premium and Enterprise plans, not the less expensive Standard plans. This means that organizations that want AI capabilities - and most will over time - will have to pay Atlassian's most expensive tiers.

As such, Atlassian stock, at a discount of 57% from its all-time high, may be an ideal entry point for investors who can hold on for at least the next couple of years while they wait for the AI opportunity to blossom.

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John Mackey, former chief executive officer of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool's board of directors.Anthony Di Pizio has no position in any of the stocks mentioned above.The Motley Fool owns shares of Amazon, Atlassian, Datadog, and Microsoft.The Motley Fool recommends the following options: long January 2026 $395 call options on Microsoft and short January 2026 $405 call options on Microsoft.The Motley Fool has the following options: long January 2026 $395 call options on Microsoft and short January 2026 $405 call options on Microsoft. The Motley Fool recommends the following options: Microsoft January 2026 $395 Call Option Long and Microsoft January 2026 $405 Call Option Short The Motley Fool has a disclosure policy.

The Bear Market Is Over: Two Artificial Intelligence (AI) Growth Stocks Are Down 35% and 57%, and You'll Regret Not Buying on the Downside was originally published by The Motley Fool.