Cathie Wood Thinks AI Will Create a $13 Trillion Software Opportunity -- 2 Unstoppable Stocks to Buy if She's Right

Key Points

• Cathie Wood is one of the most bullish voices on Wall Street when it comes to technologies like artificial intelligence.

• A report issued by Wood's firm, Ark Investment Management, suggests AI could create a $13 trillion opportunity in the software industry by 2030.

• Confluent and Datadog could be two of the biggest winners if she's right, thanks to their unique products and services.

• 10 stocks we like better than Confluent ›

Cathie Wood is the founder and CEO of Ark Investment Management, which operates a portfolio of exchange-traded funds (ETFs) that invest in innovative technology companies. Each year, the firm releases a new issue of its "Big Ideas" report featuring predictions for its biggest areas of interest, whether it be artificial intelligence (AI), cryptocurrency, or autonomous vehicles.

In the 2025 edition, Wood and her team said AI will significantly reduce the cost of software development because virtual assistants like ChatGPT will eventually write more code than human programmers. Since software often boosts productivity, Ark predicts lower costs will trigger a demand explosion that could translate into a $13 trillion opportunity across the industry by 2030.

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Confluent (NASDAQ: CFLT) and Datadog (NASDAQ: DDOG) offer a growing portfolio of tools that are critical to software and AI development, so their respective stocks could soar if Ark's predictions are right. Here's why both of them could be great buys for the long term.

Image source: Getty Images.

1. Confluent: A data streaming powerhouse

Data is at the heart of most software applications, but especially those powered by AI. In the past, businesses would store their valuable information on servers that they maintained on site, and they would come back to analyze it at a later date. This strategy isn't workable anymore, because most businesses shifted their operations online, requiring their software to have access to data in real time.

Cloud computing solves part of the problem because it enables businesses to store their data in centralized data centers, where it can be accessed online at any time. But Confluent's data streaming platform allows businesses to build data pipelines so they can ingest their data, process it, and use it to create an output in real time. Data streaming is the technology behind stock trading and sports betting platforms, which feed prices or odds to customers' smartphones in real time to create unique live experiences.

But businesses of all kinds are using it. Walmart's inventory management systems rely on data streaming to track stock levels in real time, so the company knows when a product is sold within seconds, allowing it to replenish the shelves before they run bare. Plus, it enables Walmart to display live inventory data on its website, so online shoppers know if a product is available before they hit the buy button.

AI accelerates the need for data streaming, because chatbots and virtual assistants are constantly pulling data from different sources to generate responses for the end user. Confluent's technology is helping businesses turn generic AI applications into highly personalized assistants.

For example, ChatGPT can probably tell you how much it costs to bring a surfboard onto a plane, because that information is available online. But it can't tell you whether your flight is delayed, nor can it help you move your ticket to a different day. But an airline could install a chatbot on its website and use Confluent to build data pipelines that access its internal systems. This would create a highly intelligent virtual assistant that is capable of helping customers with their highly specific inquiries, saving the airline tons of money on customer service costs.

Confluent serves over 6,140 business customers already, and that number is consistently growing. According to management's guidance, the company is on track to generate a record $1.1 billion in revenue during 2025, which would be the first time it crosses the billion-dollar milestone.

Any significant increase in software demand will likely benefit Confluent, because real-time experiences are no longer a feature but a necessity. So, if Ark is right, Confluent's stock could soar in the coming years. It's trading at a price-to-sales (P/S) ratio of 7.7 as of this writing, which is cheap relative to its three-year average of 10.7. Therefore, now could be a great time for long-term investors to take a position.

CFLT PS Ratio data by YCharts

2. Datadog: A portfolio of critical tools for AI developers

Datadog developed a cloud observability platform that businesses can use to monitor their digital infrastructure around the clock. It can alert them to website glitches or software system outages the moment they arise, so managers can fix them before they compromise the customer experience.

Datadog had around 30,500 business customers at the end of the first quarter of 2025 (ended March 31). They come from a variety of industries including retail, entertainment, manufacturing, and even financial services. The company is now expanding its product portfolio to serve the growing number of those businesses adopting AI.

Last year, Datadog launched an observability platform specifically for large language models (LLMs), which helps developers track costs, troubleshoot bugs, and measure the quality of their outputs so they can make changes to better suit their end users. During the first quarter, the number of customers using this product more than doubled compared to just six months earlier, so demand is soaring.

In June, Datadog expanded its LLM observability platform to include a new product called AI Agent Monitoring, which tracks the behavior of AI agents to ensure they are delivering the intended outcomes. This tool will be increasingly important as businesses deploy more AI agents to autonomously handle operational tasks, because unproductive or erroneous agents could significantly impact employees and customers.

Datadog said 4,000 of its customers were using at least one of its AI products at the end of the first quarter, doubling from the year-ago period. Uptake should continue at a rapid pace, because demand is likely to increase in lockstep with AI adoption.

Datadog expects to generate as much as $3.235 billion in total revenue during 2025 -- a forecast it recently increased by $40 million thanks to the strong demand it experienced across the board during the first quarter. Its stock is down 28% from its all-time high, but it's still trading at a P/S ratio of 17.4, making it considerably more expensive than Confluent. However, that is well below its peak of above 60.

DDOG PS Ratio data by YCharts

Despite its elevated valuation, long-term investors could still earn a significant return from Datadog stock. If a $13 trillion opportunity unfolds in the software space by 2030 as Ark predicts, then Datadog's current stock price will probably look like a bargain when we reflect on this moment five years from now.

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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 and Walmart. The Motley Fool recommends Confluent. The Motley Fool has a disclosure policy.