AI stock not recommended by Wall Street analysts, but they may be mistaken

Upstart, a company that uses artificial intelligence (AI) to assess borrowers, has been making waves on the stock market despite being undervalued by Wall Street analysts. For decades, lenders have used the FICO scoring system to determine an applicant’s creditworthiness, but Upstart argues that this traditional method is too narrow and overlooks quality borrowers, particularly those from minority demographics. Instead, Upstart’s algorithm analyzes over 1,600 data points on a potential borrower, including employment history, level of education, and location, resulting in 53% fewer defaults at the same approval rate as loans assessed traditionally. Plus, Upstart approves 173% more loans at the same default rate, indicating that banks are rejecting worthy borrowers. Upstart does not lend money itself, but originates loans for its bank, credit union, and car dealership partners, receiving a fee for doing so. With 99 lending partners and $2 billion in new funding, Upstart is well-positioned for long-term growth. Despite analysts’ sell ratings, Upstart’s stock has surged 120% in 2023, trading at around $29. As AI continues to infiltrate industries, including lending, Upstart believes it has a $4 trillion opportunity in personal, automotive, business, and mortgage loans. Despite challenging economic conditions, investors may want to consider Upstart for its technology and potential for growth.