Does Duolingo (DUOL) Have The Potential to Accelerate Growth Through AI-Powered Conversations?

• StockStory Top Pick DUOL +1.58%

Sands Capital, an investment management company, released its Q3 2025 investor letter for the “Sands Capital Technology Innovators Fund.” A copy of the letter can be downloaded here. Technology Innovators focus on pioneering businesses worldwide that serve as key drivers or beneficiaries of significant, long-term technological changes. The fund returned 8.4% (net) in the third quarter compared to a 12.5% return for the benchmark, MSCI ACWI Info Tech and Communication Services Index. Despite concentrated leadership, global equities appreciated in the third quarter, as measured by the MSCI ACWI. The United States accounted for almost 70 percent of the index's increase, while developed markets outside the U.S. and emerging markets also provided positive returns. You can check the fund’s top 5 holdings to know more about its best picks for 2025.

In its third-quarter 2025 investor letter, Sands Capital Technology Innovators Fund highlighted stocks such as Duolingo, Inc. (NASDAQ:DUOL). Duolingo, Inc. (NASDAQ:DUOL) is a language learning platform that offers courses in 40 different languages. The one-month return of Duolingo, Inc. (NASDAQ:DUOL) was -27.75%, and its shares lost 44.76% of their value over the last 52 weeks. On November 28, 2025, Duolingo, Inc. (NASDAQ:DUOL) stock closed at $191.41 per share, with a market capitalization of $8.848 billion.

Sands Capital Technology Innovators Fund stated the following regarding Duolingo, Inc. (NASDAQ:DUOL) in its third quarter 2025 investor letter:

"Duolingo, Inc. (NASDAQ:DUOL) is the leading global language-learning application, capturing over 90 percent of monthly active users in the category. It serves a large addressable market of roughly two billion learners worldwide, representing an estimated $100 billion annual spend. Its strength lies in transforming education into an engaging, gamified experience, which has steadily increased conversion of daily and monthly active users into paying subscribers. The platform has also broadened its appeal from career focused learners to casual users. Looking forward, we see potential for an acceleration in monetization as Duolingo rolls out AI-powered conversational tools. These features are designed to better serve learners pursuing English for professional or academic advancement—a segment that represents more than 75 percent of the market but is underrepresented among current paying users. By tailoring its platform to this larger, less-monetized audience, Duolingo could deepen engagement and expand its long term opportunity."

Duolingo, Inc. (NASDAQ:DUOL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. According to our database, 50 hedge fund portfolios held Duolingo, Inc. (NASDAQ:DUOL) at the end of the third quarter, compared to 55 in the previous quarter. While we acknowledge the potential of Duolingo, Inc. (NASDAQ:DUOL) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

In another article, we covered Duolingo, Inc. (NASDAQ:DUOL) and shared the list of best and cheap stocks to buy. In Q3 2025, Duolingo, Inc. (NASDAQ:DUOL) detracted from Baron Technology Fund's performance due to an OpenAI demo on language learning and data trends showed slowing user growth on the app. In addition, please check out our hedge fund investor letters Q3 2025 page for more investor letters from hedge funds and other leading investors.

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