Artificial intelligence (AI) sent investors into a frenzy in 2023. It all started with MicrosoftJanuary’s $10 billion bet on generative AI startup OpenAI, which develops the popular online chatbot ChatGPT. Then in September Amazon invested $4 billion in OpenAI rival Anthropic.
But these trillion-dollar tech giants weren’t the only ones snapping up AI assets. Everyday investors have identified several small-cap AI stocks with explosive potential throughout the year, including C3.ai (NYSE:IA) And Funds received (NASDAQ: UPST). These stocks have seen gains of 159% and 217%, respectively, in 2023, and 2024 could bring more upside.
Here’s why it’s not too late to seize these opportunities in the new year.
1. C3.ai revenue growth expected to accelerate
Founded in 2009, C3.ai was one of the first companies to provide AI products and services to businesses. Today, it has developed more than 40 ready-to-use and customizable applications to bring AI to at least 10 different sectors, thereby accelerating the adoption of the technology by its customers.
For example, demand forecasting platform C3.ai can help businesses improve the accuracy of their forward sales forecasts by up to 15%. This allows them to maintain more appropriate inventory levels and prices, which leads to happier customers.
Likewise, C3.ai Reliability is the ultimate predictive maintenance tool and can cut unplanned equipment downtime in half by detecting unusual activities before they lead to disaster. It is used by some of the world’s largest organizations, including Shell and the US Air Force.
C3.ai’s revenue growth has slowed over the past 18 months. This was the expected temporary consequence of a major shift away from subscription-based offerings to consumption-based offerings. Subscriptions require lengthy negotiations between C3.ai and the customer, which increases acquisition costs and slows down the onboarding process. By moving to a consumption model, customers can come and go as they please and simply pay for what they consume.
C3.ai is still in the process of migrating its existing customers to the new model, but progress is now accelerating quickly. During the second quarter of fiscal 2024 (ended October 31), the company’s revenue was $73.2 million, representing a 17% year-over-year increase. the other. This is the fastest growth rate in over a year, and C3.ai’s projections suggest it will continue to accelerate in the coming quarters.
C3.ai stock has gained 159% in 2023, but it remains 83% below its all-time high, set during the technological frenzy of late 2020. Investors got a little carried away by the valuation of the company at the time, but this created an opportunity for new buyers to acquire C3.ai shares at a discounted price, ahead of an expected significant upswing in its business.
2. Newcomers should benefit from lower interest rates
Upstart was a stock market darling during the pandemic. It went public at $20 per share in December 2020 and soared to $401 in less than a year. The company developed an AI-based algorithm designed to assess the creditworthiness of potential borrowers, and saw explosive growth while interest rates were at historic lows.
But the subsequent surge in inflation and rising interest rates in 2022 caused Upstart shares to plunge 97%. Demand for unsecured personal loans and auto loans – Upstart’s two main segments – collapsed and investors began to worry that the company’s AI algorithm was not tested in an economic environment also difficult.
But after releasing mountains of contrary data, Upstart stock has surged 217% in 2023. It remains about 90% below its all-time high, but that could represent an opportunity for investors who buy now and hold at long term.
You see, Upstart’s AI-driven approach likely represents the future of lending. Its algorithm can autonomously analyze 1,600 data points about a potential borrower and deliver instant approval 88% of the time. This is far more effective than manual, human-led assessment methods that rely on The righteous IsaacThe FICO credit scoring system, especially since it focuses only on five basic parameters to determine creditworthiness.
Additionally, Wall Street experts believe that the US Federal Reserve cut interest rates six times in 2024, which could revive consumer demand for loans. Upstart’s revenue is on track to fall 40% in 2023 from 2022, but Wall Street analysts predict it will return to growth in 2024 thanks in part to improving conditions for borrowers.
Upstart does not lend money itself. It makes loans on behalf of more than 100 partner banks and credit unions and earns fees for doing so. More than $4 trillion in personal loans, auto loans, business loans, and mortgages are originated in the United States each year, and yet Upstart has only generated $35 billion in its history . This involves a long path of growth.
Upstart has just entered the mortgage segment with its Home Equity Line of Credit (HELOC) product. This is the company’s biggest opportunity yet, and could be a great time for investors to buy its shares ahead of this business ramping up.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anthony DiPizio has no position in any of the stocks mentioned. The Motley Fool features and recommends Amazon, Microsoft, and Upstart. The Motley Fool recommends C3.ai and Fair Isaac. The Mad Motley has a disclosure policy.
2 Unstoppable Artificial Intelligence (AI) Stocks Up 159% and 217% in 2023 to Buy in 2024 was originally published by The Motley Fool