We recently compiled a list of the 20 Fintech Stocks Riding the AI Wave Higher. In this article, we are going to take a look at where Block, Inc. (NYSE:SQ) stands against the other fintech stocks.
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).
People using the Cash App paying for goods and services, highlighting the impact the of the company’s payment tools.
Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 59
Block, Inc. (NYSE:SQ), formerly known as Square, Inc., is a prominent player in the fintech sector, providing an extensive range of commerce and financial services. The company operates through two key segments: Square and Cash App. The Square segment specializes in commerce solutions, offering products that support various business operations, including payment processing, point-of-sale systems, and banking services. Cash App, on the other hand, focuses on mobile financial tools, facilitating peer-to-peer payments, bitcoin transactions, and investment options. With its diverse offerings, Block, Inc. (NYSE:SQ) aims to create an integrated ecosystem that simplifies financial transactions for both businesses and individuals.
Recent developments include the launch of Square’s new Orders Platform, designed to streamline transactions for U.S. sellers. This platform introduces advanced features such as Pre-Auth and Bar Tabs, reflecting Block, Inc. (NYSE:SQ) commitment to leveraging technology to improve sales flexibility and operational efficiency. Saumil Mehta, Head of Product for Square, expressed optimism about the innovation opportunities this platform unlocks, suggesting that it will accelerate product development velocity and enhance customer satisfaction.
Block, Inc. (NYSE:SQ) utilizes artificial intelligence (AI) to enhance the seller experience, with features like Square Online’s themes and AI-generated product descriptions in Square for Retail helping sellers engage customers and automate sales. The company offers generative AI tools that streamline operations, speed up workflows, and save time. During Block, Inc. (NYSE:SQ) Q4 2023 earnings call, CEO Jack Dorsey emphasized the critical role AI plays in the company’s present and future strategies.
Dorsey highlighted AI’s importance, noting that while many earnings calls mention AI in relation to efficiency, for Block, Inc. (NYSE:SQ), it has a transformative impact. He stated, “AI is significantly improving our productivity by enhancing the tools we build and making our engineers more efficient.”
Looking ahead, Dorsey explained that AI will enable Block to innovate faster, correct errors swiftly, and maintain a creative edge. He remarked, “AI allows us to accelerate learning, speed up product launches, fix mistakes quickly, and stay ahead in the market by integrating complex systems creatively.”
Analysts have recently shown mixed sentiment towards Block, Inc. (NYSE:SQ). New Street Research initiated coverage on September 9 with a Neutral rating, emphasizing co-founder Jack Dorsey’s role in driving growth and addressing operational challenges, while stressing the importance of reversing market share losses and creating a balanced ecosystem for both Square and the Cash App. In contrast, BofA Securities maintained a Buy rating after a virtual investor meeting, which highlighted Block, Inc. (NYSE:SQ) renewed focus on enhancing the day-to-day operations of its Square business to boost Gross Payment Volume. Meanwhile, Mizuho Securities adjusted its outlook by lowering its price target to $94 but kept an Outperform rating, anticipating a 19% growth in Block, Inc. (NYSE:SQ) gross profit for 2024, slightly above the company’s guidance of 18%.
Block, Inc. (NYSE:SQ) Q2 2024 earnings report revealed impressive results, with earnings per share (EPS) of $0.93, surpassing expectations of $0.829. The company reported gross profit of $2.23 billion, reflecting a 20% year-over-year increase. Both segments demonstrated solid growth, particularly Cash App, which achieved a gross profit of $1.3 billion, up 23% year-over-year. The company’s commitment to enhancing its technology offerings, particularly through AI, is evident as it aims to bolster its ecosystem’s value.
Furthermore, Block, Inc. (NYSE:SQ) is raising its full-year 2024 guidance for gross profit and profitability, signaling strong momentum as it approaches the second half of the year. The company is focusing on initiatives that improve product velocity, with plans for further innovations in both Cash App and Square.
In summary, Block, Inc. (NYSE:SQ) stands at the forefront of the fintech sector, leveraging AI to enhance its offerings and operational efficiencies. The positive analyst ratings and strong financial performance underscore its potential for continued growth, making it a compelling option for investors looking to seek investment opportunities in fintech.
Overall SQ ranks 8th on our list of the fintech stocks that are riding the AI wave higher. While we acknowledge the potential of SQ as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SQ but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
