Most investors know that not every stock is going to yield massive gains. In fact, most will dish out merely average performances. That’s why you own several stocks at any given time — to give yourself a better chance of holding at least one or two such big winners.
But sometimes, a compelling name comes along that looks more likely than most to deliver a life-changing amount of upside. Credit scoring outfit Upstart (NASDAQ: UPST) is one of these companies that’s caught the attention of savvy speculators.
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Upstart is an alternative to traditional credit bureaus like Equifax (NYSE: EFX), TransUnion (NYSE: TRU), and Experian (OTC: EXPGY). However, using an artificial intelligence (AI)-powered algorithm that considers more than 2,500 different data points about a particular individual, Upstart can make lending decisions that result in fewer defaults and, ultimately, 43% more loan approvals than conventional approaches.
After its business bumped into turbulence during, after, and because of the COVID-19 pandemic, things stabilized in 2024, allowing the company’s revenue growth to resume at a pace of 64% to total $1 billion last year, when it swung to a profit of $53.6 million. Analysts are looking for comparable top- and bottom-line growth this year as well as next.
That’s impressive, to be sure. And, kudos to the company for coming up with an idea that a competitor like Equifax or TransUnion should have figured out well before the AI revolution currently underway first took hold.
Does this company, however, have enough opportunity ahead of it to make unexpected millionaires out of ordinary investors? Probably not.
However, last year’s 1.5 million loan originations are only a fraction of the United States’ total lending business. There’s room to grow. What’s eventually going to slow Upstart down, though, is the industry’s stalwarts embracing AI to do something similar.
Equifax launched its Equifax Amplify AI platform in the middle of last year, empowering the company’s customers with more ways to extract decision-making insights from their existing data. Late last year, Experian answered its own question, “What is AI credit scoring?” by plainly laying out how it’s using AI to provide lenders with more meaningful information about prospective borrowers.