In this piece, we will take a look at 20 fintech stocks that are riding the AI wave higher.
Artificial intelligence (AI) is redefining how financial services operate, bringing new waves of innovation while enhancing efficiency and decision-making across the sector. From automating mundane processes to personalizing customer experiences, AI has firmly established itself as a game-changer, and nowhere is this more evident than in the fintech space. In recent years, the rise of generative AI (GenAI) models, like OpenAI’s GPT, has accelerated this transformation. These tools do more than process data, they generate meaningful content, automate workflows, and unlock insights in ways traditional AI could never achieve.
Banks and financial institutions worldwide have been quick to adopt AI, not just as a passing trend but as a strategic necessity. Many of the world’s leading banks, particularly those in North America, have allocated substantial resources toward building AI infrastructure and talent. They’re investing heavily in areas like fraud detection, customer service chatbots, and personalized financial products. The deployment of specialized hardware further underscores the commitment to refining processes, managing risk, and scaling AI-powered innovations. These investments are already paying off, leading to more efficient operations, improved profitability, and enhanced customer satisfaction.
GenAI’s impact extends beyond operational efficiency, touching nearly every facet of banking. Whether it’s speeding up loan applications, optimizing compliance procedures, or creating predictive investment strategies, AI is empowering financial institutions to meet increasingly high customer expectations. Banks are also leveraging AI to stay ahead of the curve by countering competition from tech giants and emerging business models like embedded finance, where financial services are seamlessly integrated into non-financial platforms.
The benefits of AI are not confined to banks alone; the ripple effects are felt across other areas of finance, such as wealth management, insurance, and payment solutions. AI tools are transforming the way these sectors operate by offering real-time insights, personalized recommendations, and automated claims processing. For instance, AI-driven financial advisory platforms are enabling wealth managers to provide tailored advice more efficiently. Similarly, insurance companies are using AI to streamline claims handling, improving both customer experience and internal operations.
However, the rapid adoption of AI is not without challenges. Integrating AI into financial services introduces complexities, such as the “black box” problem, where the logic behind AI decisions becomes difficult to interpret. There are also concerns about biases in algorithms, data privacy, and the potential for job displacement. To address these issues, financial institutions are working toward building robust governance frameworks that ensure transparency, fairness, and accountability in AI operations. Banks are not just adopting AI for the sake of it, they are also focused on developing ethical AI solutions that align with regulatory requirements and maintain trust with customers.
AI’s influence is also reshaping the cybersecurity landscape for fintechs. While AI strengthens defenses by detecting threats and automating responses, it simultaneously increases the attack surface, creating new vulnerabilities for malicious actors to exploit. Financial institutions must strike a careful balance, deploying AI to improve security while also ensuring that these systems remain protected from manipulation. Collaborative efforts among banks, tech firms, and regulators are essential to creating secure AI ecosystems that minimize risks without compromising innovation.
According to KPMG, global fintech investment reached $51.9 billion across 2,255 deals in first half of 2024, down from $62.3 billion in second half of 2023. The Americas led with $36 billion, while Europe, the Middle East, and Africa (EMEA) saw investment drop to $11.4 billion. Meanwhile, the Asia-Pacific (ASPAC) region secured $3.7 billion. Despite a slight dip, M&A activity shows promise, with $32.6 billion recorded, already outpacing 2023’s $58.8 billion total.
The payments sector remains dominant, attracting $21.4 billion, driven by major buyouts. AI-focused fintech is also thriving, especially in the U.S., with deals like Ramp and FundGuard securing large funding rounds. Investors are increasingly drawn to AI-powered solutions, behavioral intelligence, and new markets in Southeast Asia and Africa.
Although high-interest rates have slowed some larger transactions, the second half of 2024 may see renewed focus on areas like Central Bank Digital Currencies (CBDCs) and ESG fintech, suggesting opportunities for future growth.
In this evolving landscape, fintech companies are at the forefront of harnessing AI’s potential to transform financial services. With AI technologies now embedded across everything from fraud prevention systems to investment platforms, the fintech sector is riding a wave of momentum toward new growth and opportunities. Companies that effectively integrate AI not only enhance their internal efficiencies but also create new revenue streams and build stronger customer relationships.
This article explores 20 fintech stocks that are capitalizing on the AI revolution, riding the wave of innovation to new heights. As AI becomes more integral to financial services, these companies are positioned to lead the charge in shaping the future of the industry, one that’s more efficient, secure, and customer-centric than ever before. Whether you’re an investor seeking exposure to cutting-edge technology or someone interested in the future of finance, these fintech players are worth keeping an eye on.
Our Methodology
For this article we picked 20 fintech stocks that are making big moves on the back of latest news. With each company we have mentioned the number of hedge fund investors, which were taken from Insider Monkey’s Q2 database of 912 hedge funds.. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
20. Lightspeed Commerce Inc. (NYSE:LSPD)
Number of Hedge Fund Holders: 13
Lightspeed Commerce Inc. (NYSE:LSPD) is a key player in the fintech space, providing cloud-based software solutions that enable businesses to manage operations, engage customers, and accept payments across multiple locations. The company serves a diverse set of industries, including retail, restaurants, and hospitality, with a comprehensive platform designed for efficiency and growth.
What sets Lightspeed Commerce Inc. (NYSE:LSPD) apart is its integrated payments system, which continues to gain traction, as well as its use of AI to enhance service offerings like inventory management and product photo enhancements. These AI-powered tools are boosting merchant sales by improving product presentation and operational efficiency, further solidifying Lightspeed’s role in the AI-driven fintech landscape.
In recent months, analysts have taken a bullish stance on Lightspeed Commerce Inc. (NYSE:LSPD) prospects. Notably, BMO Capital analyst Thanos Moschopoulos raised the price target for Lightspeed Commerce Inc. (NYSE:LSPD) from $18 to $20, citing the company’s strategic review and potential buyout interest. The stock is seen as undervalued, with considerable potential for upside given its scale, earnings power, and payments penetration. Lightspeed Commerce Inc. (NYSE:LSPD) payments penetration rose to 36% in the first quarter of fiscal 2025, compared to 22% the previous year, a clear indicator of its growing influence in the financial technology market.
Lightspeed Commerce Inc. (NYSE:LSPD) recent financial performance has been strong. In its Q1 2025 earnings, the company exceeded expectations, reporting an EPS of $0.10 versus an expected $0.06. Revenue also grew by 27% year-over-year to $266.1 million, and adjusted EBITDA came in at $10.2 million, a significant improvement from last year’s loss of $7 million. This growth is driven by increased adoption of its financial services and a focus on cost control, which has allowed Lightspeed Commerce Inc. (NYSE:LSPD) to achieve profitability ahead of schedule.
With a clear path to continued growth, increased payments penetration, and the effective use of AI, Lightspeed Commerce Inc. (NYSE:LSPD) is well-positioned to capitalize on the fintech and AI wave, making it an attractive stock for investors looking to tap into the next phase of digital transformation.
Conestoga Capital Advisors stated the following regarding Lightspeed Commerce Inc. (NYSE:LSPD) in its Q2 2024 investor letter:
“Lightspeed Commerce Inc. (NYSE:LSPD): LSPD is a leading cloud-based software and payment solutions provider to the retail and hospitality industries. Following last quarter’s weak earnings and CEO change, we arrived at the conclusion that there had been fundamental deterioration leading to significant changes in corporate strategy and management. We redeployed funds to holdings with better fundamental outlooks.”
19. Lemonade, Inc. (NYSE:LMND)
Number of Hedge Fund Holders: 17
Lemonade, Inc. (NYSE:LMND) is a fintech company revolutionizing the insurance industry by leveraging AI to streamline operations and enhance customer experience. Founded in 2015, the company offers various insurance products including renters, homeowners, car, pet, and life insurance across the United States, Europe, and the United Kingdom. What sets Lemonade apart as a fintech is its use of AI technology, which powers everything from underwriting to customer interactions. AI helps Lemonade, Inc. (NYSE:LMND) rapidly assess claims, reducing response times and operational costs, making it highly efficient compared to traditional insurers.
A significant aspect of Lemonade, Inc. (NYSE:LMND) AI involvement is its commitment to a tech-first approach, as discussed in its Q2 2024 earnings call. Co-founder Shai Wininger highlighted the company’s progress in utilizing AI to improve underwriting processes and enhance operational efficiency. Lemonade’s AI-driven insurance stack is designed to automate a large portion of its business functions, helping the company scale while keeping costs low. Their next-generation technology platform, L2, is expected to bring further improvements in underwriting and product development, positioning Lemonade to capitalize on new opportunities in the AI era.
From an analyst perspective, Jefferies recently lowered its price target for Lemonade, Inc. (NYSE:LMND) to $14 from $15, maintaining an Underperform rating on the stock. The analyst pointed out potential risks for the insurance sector in Q3 2024 due to Hurricane Milton, which could overshadow positive results. Despite these challenges, Lemonade has shown improvement in its margins and policies-in-force, driven by the company’s focus on products with lower catastrophe exposure, such as pet and renters insurance.
In its Q2 2024 earnings report, Lemonade, Inc. (NYSE:LMND) demonstrated solid financial performance with a 22% year-on-year growth in gross earned premiums. While the company’s loss ratio came in at 79%, an improvement from the previous year, the impact of convective storms and winter storm activity added volatility. However, Lemonade, Inc. (NYSE:LMND) use of AI to manage risk and diversify its product portfolio has helped stabilize its loss ratios and improve gross margins.
As Lemonade, Inc. (NYSE:LMND) continues to integrate AI into its operations, the company is well-positioned to grow in the evolving insurtech landscape, despite near-term challenges highlighted by analysts.
