Cloud Leaders Datadog and Snowflake Projected to Surge Over 60% Despite Sector Downturn

2026-02-09 companies

New York, Sunday, 8 February 2026.
Analysts forecast over 60% upside for Datadog and Snowflake, highlighting that even AI giant OpenAI spends over $100 million annually on these critical data tools.

The “SaaSpocalypse” and AI Anxiety

The software sector is currently navigating a severe bear market, with the iShares Expanded Tech-Software Sector ETF falling by over 22% between December 10, 2025, and February 3, 2026 [1][4]. This downturn, colloquially dubbed the “SaaSpocalypse,” has been driven largely by fears that agentic AI tools—specifically the recent release of Anthropic’s Claude Cowork and the anticipated Google Genie 3—will commoditize software features and replace human coding roles [2][5]. Consequently, valuations have compressed significantly; the forward price-to-earnings (P/E) multiple for the software industry dropped from 35x in late 2025 to 20x as of February 6, 2026, marking its lowest level since 2014 [5]. Despite this pessimism, approximately 73% of software stocks are now considered oversold, leading analysts to identify a disconnect between market fear and the enduring value of enterprise infrastructure [6].

Datadog: Mission Critical Infrastructure

Datadog (NASDAQ: DDOG) has been a casualty of this broader sell-off, seeing its stock price decline from nearly $200 in early November 2025 to approximately $120 by early February 2026 [1]. However, market fundamentals suggest the company’s role in the AI ecosystem is foundational rather than obsolete. In a compelling counter-narrative to the displacement thesis, Bank of America noted that OpenAI itself—the very architect of the current AI boom—spent over $100 million annually with Datadog before considering moving any of that workload in-house [5]. This underscores the “mission critical” nature of observability platforms [5]. Wall Street sentiment reflects this potential, with 30 out of 33 analysts issuing a buy rating and projecting an average upside of 61% [1]. Furthermore, revenue projections remain strong, with estimates pointing to 20% growth for Datadog in 2026 [4].

Snowflake’s Rebound Potential

Snowflake (NYSE: SNOW) similarly presents a high-conviction opportunity for investors willing to look past the current volatility. As of February 6, 2026, the stock closed at $168.50, marking a daily gain of 7.52% [7]. Analysts have set an average price target of $275.58, implying a forecasted upside of 63.55% from that closing price [7]. Bank of America reaffirmed its Buy rating and $275 price target on February 6, positioning Snowflake as a top rebound play alongside Datadog and MongoDB [2][3]. Addressing the AI threat directly, Snowflake CEO Sridhar Ramaswamy has argued that the market’s view of AI as an “all-or-nothing proposition” is a mistake, suggesting instead that AI integration will be subtle and situational rather than a total replacement of existing data architectures [4].

Diverging Analyst Perspectives

While the upside potential is statistically significant, the investment community remains divided on the long-term trajectory of the sector. Goldman Sachs has signaled a “grim shift,” warning of existential risks to the industry as investors focus on the potential for AI to erode software profit growth [5]. Conversely, D.A. Davidson analyst Gil Luria maintains that “nothing about the software business model has actually changed,” suggesting the sell-off is an overreaction to a threat that has not yet materialized [1][4]. With the software price-to-sales ratio compressing from 9x in September 2025 to 6x by early February 2026, the risk-reward profile appears to favor those who believe that data infrastructure remains essential for the deployment of the very AI tools causing the current market anxiety [5].

Sources

Cloud Computing Equity Valuation