We recently published a list of 10 Tech Stocks with High Upside Potential. In this article, we are going to take a look at where The Trade Desk, Inc. (NASDAQ:TTD) stands against other tech stocks with high upside potential.

As per Forrester Research, Inc., despite persistent inflation, the US real GDP is expected to increase 2.7% in 2025 and the US tech spending is projected to see growth of 6.1% to touch a staggering $2.7 trillion. The software spending in the US is expected to increase by 10.7% in 2025. With the escalation in cybersecurity risks, companies continue to leverage cloud and GenAI technologies to fuel future growth and innovation.

AI to Drive Growth in Tech Sector in 2025

The largest US stocks, also referred to as the Magnificent 7, have seen a strong run over the previous 2 years, mainly due to the buildout of AI infrastructure, says Goldman Sachs. Sung Cho, co-head of US Fundamental Equity in Goldman Sachs Asset Management. Cho believes this buildout can significantly benefit data and security companies, and software companies successfully integrating AI in their existing product set. As the Fed continues to cut rates, the smaller tech companies – which saw contraction in their multiples because of higher rates – might see a favourable macro backdrop.

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

Robust AI Investments are On the Horizon

UBS has highlighted how AI has and will continue to drive the growth of the broader technology sector. As per the firm, since the rollout of ChatGPT in November 2022, the total market capitalization of companies listed on the US technology exchange NASDAQ increased to ~US$13.5 trillion. Notably, around two-thirds of this value increase has been directly caused by the AI sector. Moving forward, the decisive factor is expected to be the extent to which significant investments in AI-based infrastructure can be translated into profitable business models.

While highlighting the consensus estimates, UBS stated that the 4 major US technology corporations are projected to invest ~US$280 billion in AI this year. Given the increased usage of this key technology across industries, value creation processes are expected to be optimized. This can lead to significant productivity gains. One such area is the market for robotics and automation, which is expected to reach a sales volume of ~US$350 billion in 2025, says UBS analysts. Notably, humanoid robotics will be the key area of particular interest because of the innovations.

Our Methodology

To list the 10 Tech Stocks with High Upside Potential, we used a screener and shortlisted the stocks catering to the broader technology sector. Next, we filtered out the stocks having an average upside potential of at least ~30%, as of February 28. Finally, the stocks were arranged in ascending order of their average upside potential. We also mentioned the hedge fund sentiments around each stock, as of Q4 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

A large array of computer screens and tech equipment representing the technology company's self-service cloud-based platform.

The Trade Desk, Inc. (NASDAQ:TTD)

Average Upside Potential: ~63.5%

Number of Hedge Fund Holders: 63

The Trade Desk, Inc. (NASDAQ:TTD) operates as a technology company, providing a cloud-based, AI-driven platform for programmatic advertising, allowing organizations to purchase and optimize digital ad placements. The Connected TV (CTV) market reflects a significant growth opportunity for the company. With viewers shifting from traditional linear TV to streaming platforms, advertisers continue to follow, and are shuffling budgets to reach these audiences effectively. The Trade Desk, Inc. (NASDAQ:TTD) established robust partnerships with major CTV platforms and content providers, placing it at the forefront of such transition.

The Trade Desk, Inc. (NASDAQ:TTD)’s CTV operating system, Ventura, and the supply path optimization capabilities provide it a competitive advantage in this ever-evolving segment. The advertisers who are looking for a unified approach to reach audiences through multiple streaming services can find The Trade Desk, Inc. (NASDAQ:TTD)’s offering appealing. With the world’s leading advertisers shifting to premium scalable channels in contrast to the limitations of user-generated content, there remains a significant opportunity. Moving forward, the company is well-placed to help its clients take full advantage of data-driven advertising on the premium internet.

With the growth in the broader technology industry, advertising has become automated, AI-powered and data-driven. The Trade Desk, Inc. (NASDAQ:TTD) remains at the forefront of this transformation as it continues to benefit from the expansion of streaming, AI, and retail media. Rowan Street Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:

“The Trade Desk (TTD): Investment Initiated: March 2020

Internal Rate of Return (IRR): 54%

The Trade Desk has been our most successful investment to date. March 2025 will mark five years since we opportunistically initiated our position at a cost basis of $17.40 (split-adjusted). Since then, TTD has appreciated more than sevenfold, delivering an annualized return of approximately 54%.

These exceptional results far outpace the company’s strong fundamental growth, with revenues and earnings compounding at approximately 25% annually over this period (refer to the table below). The primary reason for this outsized return lies in the price at which we were able to acquire TTD during the early days of the pandemic, when market fears briefly drove it down to just 10x revenues. Today, the valuation has expanded significantly to approximately 25x revenues, amplifying our returns…” (Click here to read the full text)

Overall, TTD ranks 1st on our list of tech stocks with high upside potential. While we acknowledge the potential of TTD as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than TTD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.