20 Fintech Stocks Riding the AI Wave Higher

17. Upstart Holdings, Inc. (NASDQ:UPST)

Number of Hedge Fund Holders: 18

Upstart Holdings, Inc. (NASDQ:UPST) operates a cutting-edge, cloud-based AI lending platform in the United States. Founded in 2012 and headquartered in San Mateo, California, the company connects consumer demand for personal loans, auto loans, home equity lines of credit, and small-dollar loans with banks and credit unions. Upstart Holdings, Inc. (NASDQ:UPST) leverages AI and machine learning (ML) to assess credit risk and offer personalized loan terms, setting it apart as a significant player in the fintech space. AI is deeply integrated into its business model, improving the efficiency and accuracy of credit assessments and enhancing its competitiveness in the fintech sector.

AI plays a central role in Upstart Holdings, Inc. (NASDQ:UPST) operations, particularly through its advanced credit risk models. One major milestone was the introduction of Model 18 (M18), which generates over 1 million predictions per loan applicant, allowing the company to fine-tune annual percentage rates (APR) with exceptional accuracy. By using AI to automate 91% of its loan approvals—up from 73% two years ago—Upstart has significantly reduced the need for human intervention, making the loan process faster and more efficient for borrowers while maintaining robust fraud detection capabilities.

From an investment perspective, analysts have shown increasing confidence in the stock. On September 20, 2024, Mizuho raised its price target for Upstart Holdings, Inc. (NASDQ:UPST) to $48 from $33, maintaining an “Outperform” rating. Mizuho cited improving market valuations and a favorable lending environment spurred by lower interest rates as key reasons for the upgrade. The firm also increased its valuation multiple from 4x to 6x, reflecting heightened optimism about growth prospects in the financial technology sector.

In the company’s Q2 2024 earnings call, CEO Dave Girouard emphasized that Upstart Holdings, Inc. (NASDQ:UPST) AI-driven improvements are driving its growth and profitability. Notably, Upstart continues to expand its reach in auto loans and home equity lines of credit (HELOC), with zero defaults on over 300 HELOCs originated to date. Upstart Holdings, Inc. (NASDQ:UPST) AI-driven innovations and expanded product offerings make it a key fintech stock to watch.