The S&P 500(SNPINDEX: ^GSPC) is down 6% in 2025 amid rising global trade tensions, triggered by the sweeping tariffs President Donald Trump enacted on imported goods from America's trading partners. But throughout history, the stock market has always recovered to new highs even after the most brutal economic shocks -- from the Great Depression to the COVID-19 pandemic -- so the recent dip could be a great opportunity for investors to put some money to work.
Rising trade tensions can impact all companies if they cause a global economic slowdown. However, Oracle(NYSE: ORCL) and Datadog(NASDAQ: DDOG) sell software and digital services, which aren't directly subjected to tariffs (at least not yet), so they could fare better than most companies. Here's why investors with a spare $5,000 (money they don't need for immediate expenses) might want to split it equally between the two stocks and hold them for the long term.
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The case for Oracle
Oracle offers a suite of database management software, in addition to a large portfolio of cloud applications, which can help businesses streamline their financial operations, their supply chain planning, and their human resources workflows (among several other things). But investors have mostly focused on the Oracle Cloud Infrastructure (OCI) segment recently, which is where Oracle accounts for the revenue it earns from leasing its data centers to enterprise customers.
Oracle's newest data centers have become extremely popular with top artificial intelligence (AI) start-ups like OpenAI, Cohere, and Elon Musk's xAI. They allow developers to scale up to a staggering 131,072 of Nvidia's industry-leading Blackwell chips, paving the way for them to create the most advanced AI models yet. Plus, Oracle's data centers use random direct memory access (RDMA) networking technology, which moves data from point-to-point much faster than traditional Ethernet networks.
Since most developers pay for computing capacity by the minute, having access to more chips along with faster networking technology can translate into substantial cost savings.
Oracle generated $14.1 billion in total revenue during its fiscal 2025 third quarter (ended Feb. 28), which was a 6% increase from the year-ago period. But OCI revenue, specifically, soared by a whopping 49% to $2.7 billion. Plus, Oracle had $130 billion in remaining performance obligations (order backlog across all business segments) at the end of the quarter, which was up by 63%, and chairman Larry Ellison said AI data center demand was a big source of that growth.
Simply put, demand for Oracle's data centers is significantly outstripping supply. The company opened its 101st data center cloud region during the third quarter, but it plans to eventually operate somewhere between 1,000 and 2,000 of them to meet that demand. In other words, the OCI business might be poised for tenfold growth (at least) in the coming years.
Oracle stock is trading at a 28% discount to its all-time high, and when you view that in the context of the company's incredible growth potential, this might be a great time to take a long-term position.
The case for Datadog
Datadog developed a cloud observability platform, which monitors an organization's digital infrastructure around the clock, alerting them to technical issues before they materially impact the customer experience. For example, a retailer might be unaware its e-commerce website is down for customers in one specific country until it sees a steep drop in sales, but if it's using Datadog, it would be alerted to the problem immediately.
Datadog is now using its experience in the cloud space to launch a suite of AI tools. It released an observability product specifically for large language models (LLMs) last year, which helps developers track costs, identify technical issues, and evaluate the quality of each output so they immediately know if the models are generating inaccurate information. Datadog also built another tool for businesses who use OpenAI's ready-made LLMs (instead of developing their own), which monitors their usage to help them manage their budgets.
At the end of 2024, Datadog said 3,500 of its 30,000 customers were using at least one of its AI products. That number was up 75% from 2,000 at the start of the year, so adoption is scaling quickly. Observability products will become increasingly popular as more businesses deploy AI into their operations, the same way cloud observability tools have become essential for businesses transitioning into the digital age.
Datadog generated a record $2.68 billion in total revenue during 2024, which was up 26% from 2023. It was above the company's forecast of $2.66 billion, which management had raised three times throughout the year. During the fourth quarter, specifically, AI accounted for 6% of Datadog's total revenue for the period, which doubled from 3% in the year-ago quarter. This is yet another data point that reflects how quickly its AI products are scaling.
Datadog stock is down 29% this year amid the sell-off in the broader market, but it's also down 47% from its all-time high that was set during the tech frenzy in 2021. Its valuation was unsustainable back then with its price-to-sales (P/S) ratio soaring above 60. But thanks to the company's continuous revenue growth since then, its P/S ratio is now at 13.5, which is at the lower end of its range since the stock went public in 2019.
Given the early success of Datadog's AI products, this could be a great chance to buy the stock ahead of the company's next long-term growth phase.
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog, Nvidia, and Oracle. The Motley Fool has a disclosure policy.
