While broader markets sell off amid Iran conflict concerns, five stocks are outperforming their weak peer groups by demonstrating relative strength and solid fundamentals. These stocks span software, cybersecurity, healthcare, and telecom sectors, each showing earnings growth and operational discipline that justify their resilience.

Amid a market sell-off with the S&P 500 down 9% and Nasdaq-100 in correction territory, two under-the-radar growth stocks present buying opportunities. Lemonade, an AI-powered insurance technology company, has grown customer base 23% and in-force premiums 31%, with management projecting 61% revenue growth in 2026 and a tenfold increase in IFP over the next decade. Datadog, a cloud observability platform expanding into AI tools, saw 28% revenue growth in 2025 with AI product adoption surging 57% year-over-year, now trading near its cheapest valuation since going public.

U.S. equities tumbled to their lowest levels in nearly seven months on Friday as the Nasdaq 100 officially entered correction territory, down over 10% from January highs. The decline was driven by geopolitical tensions with Iran rejecting ceasefire options, surging crude oil prices, deteriorating consumer sentiment, and rising inflation expectations. The 30-year Treasury yield climbed to 4.958%, threatening to breach 5% for the first time since July 2025, while the Fed rate hike probability by December jumped to nearly 50%.

While software stocks face pressure due to concerns that AI tools may replace existing software workflows, expert Kuran Francis identifies three companies positioned to benefit: CrowdStrike (cybersecurity demand rising with AI threats), Zscaler (zero-trust security becoming critical), and Datadog (usage-based pricing model aligned with AI economy). Adobe is flagged as vulnerable due to its seat-based pricing model exposure to AI disruption.

Software stocks have experienced a significant sell-off due to AI-related concerns, but the author believes the market reaction is overdone for several high-quality software companies. The article recommends buying four quality software stocks, including ServiceNow, which the author recently purchased, arguing that the AI threat to their businesses is exaggerated.

Datadog (NASDAQ: DDOG) shares rose in premarket trading following a strategic partnership announcement with Sakana AI to accelerate enterprise AI adoption. The collaboration will focus on joint research, product innovation, and go-to-market strategies, particularly for large enterprise customers in Japan. Despite neutral RSI and bearish MACD signals, the stock carries a Buy rating with an average price target of $184.11.

Datadog and Sakana AI announced a strategic partnership to collaborate on AI research, product innovation, and enterprise adoption. The partnership combines Sakana AI's advanced foundation model research with Datadog's observability and security platform to help enterprises better understand and operate AI systems at scale. The collaboration will initially focus on large enterprise customers in Japan before expanding globally.

Flip AI, an observability intelligence platform, has been recognized as an IDC Innovator for AI-Enabled IT Incident Management. The company's contextual intelligence application integrates with existing observability tools like Datadog and Splunk to provide rapid root cause analysis and incident insights for SRE teams at major enterprises.

Palantir Technologies has reinvented itself as an AI-focused enterprise software company, expanding beyond its defense roots into healthcare, financial services, and manufacturing. The company reported impressive 2025 results with 56% revenue growth and $1.6 billion in net income. However, its P/S ratio of 103 is significantly higher than peers, making valuation a concern. The analyst recommends dollar-cost averaging into the stock rather than making a large bet, positioning it as a compelling AI opportunity outside the Magnificent Seven.

Cathie Wood's Ark Invest made significant purchases on Monday, buying shares of CoreWeave, Datadog, and Circle Internet Group. CoreWeave, an AI infrastructure provider, has fallen from a summer high of $187 to $90, but maintains strong growth prospects with $55.6 billion in order backlog. Datadog, a cloud monitoring software company, has seen growth decelerate from 60%+ to 27% revenue growth. Circle Internet Group, a stablecoin issuer, has plummeted 80% from its peak but shows accelerating revenue growth. Wood is capitalizing on recent market volatility to purchase these previously held positions at discounted prices.

Tropic, an intelligent procurement platform, announced record 2025 results with $85 million in customer savings, $18 billion in spend under management, and 100,000 price benchmarks delivered. The company launched AI agents for procurement tasks while emphasizing human expertise remains central to execution. Standout savings included $1.62M on Workday, $571K on Affirm, and $404K on Datadog purchases.

Snowflake announced plans to acquire Observe for approximately $1 billion to embed AI-powered observability into its AI Data Cloud and expand its IT operations management capabilities. The integration will enable enterprises to ingest, store, and analyze telemetry data at lower cost while shifting from alert-based monitoring to automated troubleshooting using open standards like Apache Iceberg and OpenTelemetry.