Datadog downgraded on OpenAI risk

Guggenheim has downgraded Datadog (DDOG) to Sell from Neutral, setting a price target that implies over 30% downside from current levels.

• The firm cites customer concentration risk, specifically pointing to OpenAI, believed to be Datadog’s largest customer.

• Guggenheim analysts warn that OpenAI is developing its own observability tools, which could reduce its reliance on Datadog’s platform.

• The downgrade reflects broader concerns that AI-native companies may shift away from third-party infrastructure in favor of custom-built solutions.

Context:

Datadog is widely used for monitoring and observability across cloud applications. If major AI customers like OpenAI internalize those functions, it could pose a long-term headwind to Datadog’s growth narrative.

Datadog is Datadog will replace Juniper Networks (JNPR) in the S&P 500, effective before the market opens on July 9.