Datadog (DDOG): Positioned to Capture Explosive Agentic AI Growth

Glass Lake Wealth Management recently released its third-quarter 2026 investor letter. The letter can be downloaded here. Markets advanced in the third quarter, with the S&P 500 (SPY) advancing another 2.4%, bringing its year-to-date return to 12.7% despite rising Treasury yields, with technology, communication services, energy, and mega-cap stocks outperforming. The Iran War pushed Brent crude near $100 and diesel prices sharply higher, increasing inflation risks. The 10-year Treasury yield reached 5.3% amid fiscal concerns and strong AI-related borrowing demand. AI investment remains the market's main growth engine: hyperscalers raised 2026 capital-spending expectations to $710 billion, benefiting infrastructure suppliers and emerging AI-agent companies. However, elevated expectations make AI-related stocks vulnerable to corrections if spending or monetization disappoints. The portfolio emphasizes tax-efficient, quality-growth companies with durable advantages and strong cash flows. Positions may be trimmed into strength, while higher interest rates could justify reallocating cash toward short- and intermediate-term fixed income. Also, check the fund's top five holdings to see its best picks in 2026.

In its third-quarter 2026 investor letter, Glass Lake Wealth Management highlighted Datadog, Inc. (NASDAQ:DDOG), noting that it benefitted significantly from explosive growth in AI. Datadog, Inc. (NASDAQ:DDOG) is a leading cloud computing and software company that provides an observability and security platform for cloud applications. On October 02, 2026, Datadog, Inc. (NASDAQ:DDOG) closed at $277.22, with a $99.54 billion market capitalization. Reflecting the recent momentum, the stock posted a ~103.85% YTD gain, trading within a 52-week range of $98.01 to $292.72. Datadog, Inc. (NASDAQ:DDOG) reported $3.97 billion in trailing twelve-month (TTM) revenue.

Glass Lake Wealth Management stated the following regarding Datadog, Inc. (NASDAQ:DDOG) in its Q3 2026 investor letter

"Several of our holdings stand to benefit from the explosive growth in agentic AI. Datadog, Inc. (NASDAQ:DDOG) benefits from agentic AI because increasingly complex, autonomous AI applications create more services, model calls, dependencies, and failures that enterprises need Datadog to monitor, troubleshoot, and secure."

Datadog, Inc. (NASDAQ:DDOG) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026. According to our database, 92 hedge fund portfolios held Datadog, Inc. (NASDAQ:DDOG) at the end of the second quarter, up from 80 in the previous quarter. While we acknowledge the potential of Datadog, Inc. (NASDAQ:DDOG) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we discussed Datadog, Inc. (NASDAQ:DDOG) and shared a list of best agentic AI stocks to buy. In addition, please check out our hedge fund investor letters Q3 2026 page for more investor letters from hedge funds and other leading investors.

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This article is originally published at Insider Monkey.