2 Growth Stocks I Plan to Buy if the Stock Market Crashes

The S&P 500's Shiller CAPE ratio reached 40.3 on Sept. 15, its second-highest level since the 2000 dot-com peak, raising correction risk amid higher oil prices, inflation concerns, AI-sector uncertainty, and upcoming U.S. midterm elections. The article identifies DigitalOcean as a potential pullback buy, citing $1.1B in ARR, AI-customer ARR growth of 212% to $234M, and an $894M backlog, though its 13.2x P/S multiple exceeds its 8.6x historical average. Lemonade is also highlighted after in-force premiums rose 32% to more than $1.4B and revenue increased 79% to $294.4M, supported by a 5% loss-adjustment-expense ratio and a 4.3x P/S multiple below its three-year average.

Analysis

DOCN's key debate is not AI demand but conversion of contracted demand into deployable capacity without impairing returns. Its SMB concentration makes revenue more cyclical and churn-sensitive than hyperscalers, while GPU procurement and data-center buildouts create working-capital and depreciation exposure before utilization is proven. A broad risk-off move could therefore compress its multiple disproportionately; the 1-3 month catalyst is evidence that backlog converts to revenue while net retention and gross margin remain stable, rather than another AI-product announcement.

LMND is the more differentiated setup: sustained claims-handling efficiency can create operating leverage as premium scale rises, but the market should not value a low expense ratio as equivalent to underwriting profitability. The relevant 6-18 month variable is whether gross loss performance holds through adverse weather and auto-loss trends; reinsurance costs, state rate approvals, and reserve development can quickly absorb apparent AI efficiency gains. Its faster premium growth also increases the dollar sensitivity to a deterioration in loss ratios.

Consensus likely overstates the value of buying either name solely on an index-level valuation pullback. DOCN needs lower entry valuation plus capacity discipline; LMND needs proof that growth is not being purchased via underpriced policies. If inflation or energy persists, higher discount rates are especially unfavorable to long-duration, cash-flow-light software and insurtech equities, while NVDA/AMD face a second-order risk that smaller-cloud capex is deferred even if hyperscaler demand remains intact.

Key Decisions for Investors

• Keep DOCN on a conditional long watchlist, not an immediate purchase: initiate only after a 20-30% drawdown or valuation re-rates toward its historical range, paired with a quarter showing backlog conversion, stable net retention, and no material gross-margin erosion. Thesis is invalidated by rising churn, GPU-capacity delays, or incremental capex without corresponding revenue guidance.
• Accumulate LMND only in tranches following confirmation that gross loss ratio remains disciplined through the next two quarterly reports; use a 6-18 month horizon. Target asymmetric upside from operating leverage, but cap exposure given catastrophe/reserving tail risk; exit on adverse reserve development, higher reinsurance burden, or loss-ratio deterioration that cannot be offset by approved rate increases.
• For a near-term macro hedge against a rates/inflation shock, express relative caution via long XLE or energy exposure versus a basket short of high-multiple, unprofitable growth including LMND and selected SMB-cloud exposure, rather than shorting NVDA outright. Reassess if oil retraces materially or core inflation expectations fall, which would restore duration appetite.
• Monitor NVDA and AMD commentary for demand segmentation: any indication that enterprise/neo-cloud orders are being delayed would weaken DOCN's capacity-utilization case before it appears in its reported revenue. Treat such supplier commentary as an early warning, not a standalone short signal.