2 No-Brainer Growth Stocks to Buy With $5,000 During the S&P 500 Bull Market
The S&P 500 set more than 50 record highs during 2024, extending the bull market that began when the index bottomed in October 2022.
Tech stocks have led the market higher for the last couple of years, and that’s likely to continue as trends like artificial intelligence (AI) gather momentum. Datadog (DDOG -0.89%) and CrowdStrike (CRWD -2.05%) have embedded AI into their legacy businesses to drive growth, and even to launch new products.
Both stocks could be great buys right now, so here’s why investors with a spare $5,000 in cash (money they don’t need for immediate expenses) might want to split it equally between them.
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The case for Datadog
The idea of running a 9-to-5 operation is unrealistic for modern businesses, because most of them have an online component that customers can access around the clock. Datadog’s cloud observability platform helps them monitor their digital infrastructure, alerting them to technical issues before they impact customers. Since the competition is always just one click away, delivering a smooth digital experience has never been more important.
Datadog serves over 29,200 businesses across multiple industries, from retail to financial services to entertainment, and it’s now using its cloud expertise to enter the AI space.
Earlier this year, the company launched a new observability tool specifically for large language models (LLMs), which sit at the foundation of AI chatbots and software applications. It can help developers monitor costs, troubleshoot technical issues, and even evaluate response quality to make sure the model is delivering appropriate outputs to the end user.
At a conference in December, Datadog also highlighted several advanced AI integrations with the Amazon Web Services cloud platform. They include a monitoring tool for Amazon’s Trainium and Inferentia AI data center chips, which helps developers maximize efficiency and optimize LLM performance. There is also a monitoring tool for the Amazon Bedrock platform, which is where developers access the latest third-party LLMs from companies like Anthropic and Meta Platforms.
Datadog generated $690 million in revenue during the third quarter of 2024. The company said 6% of that came from AI-native customers, which more than doubled from 2.5% in the year-ago period. Plus, around 3,000 of its customers were using one or more of its AI integrations at the end of the quarter, up from 2,500 just three months earlier. Simply put, AI is already becoming an influential piece of Datadog’s overall business.
Datadog stock trades at a price-to-sales (P/S) ratio of 21.6, which isn’t cheap compared to a basket of other enterprise software, cloud, and AI stocks:
DDOG PS Ratio data by YCharts
However, 21.6 is actually a 26% discount to its long-term average P/S ratio of 29.2 going back to when the company went public in 2019.
According to a 2024 study by McKinsey and Company, around 72% of organizations have adopted AI in at least one business function, but only 8% are using it in five or more. In other words, AI adoption is still in the very early stages, and businesses will need monitoring tools as they expand their usage — just like they needed cloud monitoring tools to help manage their digital transition.
Therefore, Datadog stock could be a great addition to any portfolio as this trend plays out over the next few years.
The case for CrowdStrike
CrowdStrike is one of the world’s largest cybersecurity companies, and it had a very eventful year in 2024. It released a corrupted software update in July that crashed an estimated 8.5 million computers worldwide, costing some of its biggest enterprise customers more than $5 billion. CrowdStrike stock plunged by more than 40% after the incident, but it has almost fully recovered.
Investors expected a significant customer exodus following the outage, which would’ve cratered the company’s revenue — but it never eventuated. As it turns out, CrowdStrike is simply too valuable to its customers, and it’s very hard to replace.
The cybersecurity industry has a history of fragmentation, meaning businesses had to piece their cybersecurity stack together from several vendors that specialized in specific products. CrowdStrike, however, developed one of the only true all-in-one solutions in the market. Its Falcon platform protects everything from cloud networks to employee identities to endpoints (computers and devices).
Falcon is powered by AI, which means most of its 28 modules (products) provide fully automated protection. CrowdStrike’s models are trained on more than 2 trillion security events every day, so they are constantly becoming faster and more accurate.
During the company’s fiscal 2025 third quarter (ended Oct. 31), a record 66% of CrowdStrike’s customers were using at least five Falcon modules. Management also said it was the biggest quarter ever for the section of its sales department that handles organizations with fewer than 2,500 employees. To put it another way, mid-sized companies are flocking to Falcon at the moment.
CrowdStrike ended the third quarter with a record $4 billion in annual recurring revenue (ARR), which was a 27% increase from the year-ago period. The company reiterated its goal to grow its ARR to $10 billion by fiscal 2031, so it clearly doesn’t expect any long-term fallout from last year’s outage. But considering CrowdStrike thinks its addressable market could grow to $250 billion over the next few years, that ARR target still represents a mere fraction of its opportunity.
CrowdStrike stock isn’t cheap right now. It trades at a P/S ratio of 23.6, which is a big premium to the P/S ratio of one of its main rivals, Palo Alto Networks:
CRWD PS Ratio data by YCharts
However, CrowdStrike is growing its revenue almost twice as fast as Palo Alto, so it deserves a premium valuation. Plus, if we assume the company will succeed in growing its ARR to $10 billion over the next five or six years, that places its stock at a forward P/S ratio of just 8.7. In other words, the stock would have to soar 171% by fiscal 2031 just to maintain its current P/S ratio of 23.6.
That potential return would be enough to turn a $2,500 investment (half of your $5,000) into almost $6,800.
