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In 2023, artificial intelligence (AI) has investors excited. It all started with something like this: microsoftIn January, it bet $10 billion on OpenAI, a generative AI startup that develops the popular online chatbot ChatGPT.Then in September Amazon Invested $4 billion in OpenAI rival Anthropic.
But these multitrillion-dollar tech giants aren’t the only ones scooping up AI assets. Everyday Investor has identified several small-cap AI stocks with explosive potential throughout the year. C3.ai (NYSE:AI) and Upstart Holdings (NASDAQ:UPST). These stocks are up 159% and 217%, respectively, in 2023, and could rise even more in 2024.
Here’s why it’s never too late to buy these opportunities in the new year.
1. C3.ai’s revenue growth is expected to accelerate
Founded in 2009, C3.ai was one of the first companies to provide AI products and services to enterprises. Currently, the company has developed over 40 of his pre-built and customizable applications to bring his AI to at least 10 different industries and accelerate customer adoption of the technology.
For example, the C3.ai demand forecasting platform helps businesses improve the accuracy of future sales forecasts by up to 15%. This allows you to maintain better inventory levels and pricing, leading to increased customer satisfaction.
Similarly, C3.ai Reliability is the ultimate predictive maintenance tool that can cut unplanned equipment downtime in half by detecting anomalous activity before it becomes a catastrophe. 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 significantly over the past 18 months. This was an expected temporary result of the major shift from subscription-based trading to consumption-based trading. Subscriptions require lengthy negotiations between his 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 pay only for what they use.
C3.ai is still transitioning existing customers to the new model, but progress is coming quickly. In his most recent fiscal second quarter of 2024 (ending Oct. 31), the company’s revenue totaled $73.2 million, an increase of 17% year-over-year. This is the fastest growth rate in a year, and C3.ai forecasts that growth will accelerate further in the coming quarters.
C3.ai stock has risen 159% in 2023, but is still 83% below its all-time high reached during the height of the tech frenzy at the end of 2020. Investors were a little carried away with the company’s valuation at the time, but that means the company has an opportunity for new buyers to pick up their C3.ai shares at a discount now that the business is expected to see a significant upturn. has been created.
2. Start-ups should benefit from lower interest rates
Upstart has been a darling of the stock market during the pandemic. The company went public in December 2020 at $20 per share, but it soared to $401 in less than a year. The company developed an AI-based algorithm designed to assess the creditworthiness of potential borrowers and has experienced explosive growth while interest rates are at historic lows.
But as inflation soared and interest rates continued to rise in 2022, Upstart’s stock price plummeted 97%. Demand for Upstart’s two main segments, unsecured personal loans and auto loans, collapsed, leading investors to worry that the company’s AI algorithms were not battle-tested in such a tough economic environment. became.
But after releasing a ton of data to the contrary, Upstart stock soared 217% in 2023. It’s still about 90% below its all-time high, but it could present an opportunity for investors who buy now and hold for the long term.
Upstart’s AI-powered approach likely represents the future of lending. Its algorithm autonomously analyzes his 1,600 data points about potential borrowers and can give instant approval 88% of the time. This is much more efficient than manual human evaluation methods. fair isaac‘s FICO credit scoring system, especially considering that it only focuses on five key metrics to determine creditworthiness.
Additionally, Wall Street experts believe the Federal Reserve could cut interest rates six times in 2024, potentially reigniting consumer demand for loans. Upstart’s revenue is expected to decline 40% in 2023 compared to 2022, but Wall Street analysts predict a return to growth in 2024, due in part to improved conditions for its borrowers. .
Upstart itself does not lend money. The company originates loans on behalf of his more than 100 bank and credit union partners and earns fees on them. More than $4 trillion in personal, auto, business and mortgage loans are originated in the United States each year, but Upstart has originated only $35 billion to date. That means a long runway for growth.
Upstart just entered the mortgage space with its Home Equity Line of Credit (HELOC) product. This is the company’s biggest opportunity ever, and now could be a great time for investors to buy into the company’s stock before the business gets underway.
Should you invest $1,000 in C3.ai now?
Before buying C3.ai stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks Things investors can buy right now…and C3.ai wasn’t among them. These 10 stocks have the potential to generate impressive returns over the next few years.
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*Stock Advisor returns as of December 18, 2023
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Anthony Di Pizio has no position in any stocks mentioned. The Motley Fool has positions in and recommends Amazon, Microsoft, and Upstart. The Motley Fool recommends C3.ai and Fair Isaac. The Motley Fool has a disclosure policy.
2 Unstoppable Artificial Intelligence (AI) Stocks Rise 159%, 217% in 2023, Buy in 2024
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