If a Stock Market Crash Is Coming, These 2 Growth Stocks Might Be Worth Selling

With the S&P 500 near a record and a Shiller CAPE of 41.8 (2nd-highest on record), the article warns catalysts—Middle East tensions, elevated inflation, rising odds of Fed hikes, and November midterms—could trigger a stock correction. It flags SpaceX and Datadog as valuation-sensitive: SpaceX trades at ~83x trailing P/S (and ~18x forward vs a $1.92T market cap), while Datadog trades at ~21.8x P/S despite raising 2026 revenue guidance to $4.45B–$4.47B. Both are characterized as vulnerable to downside if broader market turbulence returns.

Analysis

The relevant mechanism here is not “valuations are high” but that the market’s most duration-sensitive cohorts are now carrying the burden of an earnings rerating at the same time macro uncertainty is rising. If inflation or yields reaccelerate, the first-order loser is not the index so much as premium software/AI infrastructure names where future cash flows are doing most of the work in the valuation. DDOG is more exposed than the megacap AI platforms because it lacks the same balance-sheet buffer and can’t absorb a multiple reset as easily as MSFT or GOOGL.

SPCX is a different animal: it is structurally tied to a capital-intensive rollout cycle, so higher rates and tighter funding conditions would compress private-market marks even if operating demand stays intact. The second-order risk is that any weakness in the broad market forces crossover investors to reprice late-stage private AI assets first, because secondary liquidity is thin and marks lag public comps. That creates a funding-cost overhang on adjacent private AI and space-adjacent suppliers before it shows up in reported revenue.

Contrarianly, this is not yet a clean “sell everything expensive” setup. If inflation cools and the Fed leans dovish, the market can keep paying up for scarce growth, and the short side in DDOG/AI-adjacent software can become a crowded factor bet rather than a fundamental one. The thesis is falsified if real yields roll over, QQQ holds its 50-day on any macro scare, and DDOG proves AI product attach is accelerating enough to sustain upward guidance revisions despite broader volatility.

Key Decisions for Investors

• Tactically fade strength in DDOG only on market-wide risk-off days: short DDOG vs long MSFT or GOOGL as a 1-3 month pair trade. Rationale: similar AI exposure, but MSFT/GOOGL have lower revenue multiple risk and stronger free-cash-flow defense. Stop if DDOG outperforms the pair by >8-10% on continued AI-product commentary.
• Use any broad-market rally to buy a 2-3 month QQQ put spread rather than naked puts. This expresses the view that macro/yield shocks matter more than stock-specific news and limits theta if the correction never materializes. Falsify if CPI/core PCE comes in soft and 10-year real yields break lower.
• Avoid initiating a public-market proxy short on SPCX exposure unless you have access to private secondary marks or a correlated vehicle. For now, treat it as a watch item for private AI funding spreads: if late-stage AI rounds start resetting lower, expect public AI software multiples to follow within 1-2 quarters.
• If you need an immediate hedge against factor compression, rotate some capital from high-multiple software into cash-rich large-cap tech quality (MSFT, GOOGL) rather than outright index de-risking. That keeps exposure to AI upside while reducing valuation beta.