Upstart's AI-driven growth story takes a turn: The financial-tech company's stock is facing a significant dip, and it's all because of a slowdown in growth that's bigger than Wall Street predicted. But here's the twist: Upstart's CEO, Dave Girouard, believes their AI platform is performing exceptionally well, adapting to changing market conditions and delivering strong results.
Upstart's lending business saw an impressive 80% growth in loan originations during the September quarter, outpacing revenue growth. Girouard highlights a sixfold increase in net income, showcasing the company's financial strength.
In a bold statement, Girouard asserts that "the opportunity for AI in credit is unimaginably large," positioning Upstart as a leader in this trillion-dollar industry. He believes their underwriting models are resilient, adapting to market fluctuations and maintaining stable trends among customers.
However, the market seems to be concerned about the potential impact of a K-shaped economy, where upper-income consumers thrive while lower-income individuals struggle. Upstart's management pushes back against this notion, citing "no material deterioration" in consumer credit strength and even "signs of improvement."
According to Upstart's analysis, credit scores are a key indicator. Those with sub-660 scores are doing relatively well, and those with 800-plus scores are thriving. But it's the middle-range scores (720-750) that are experiencing elevated default rates, suggesting a more U-shaped recovery.
Upstart's stock has a history of big swings post-earnings, and this latest report is no exception. With eight out of the last ten post-earnings moves being double-digit, investors are keeping a close eye on the company's performance.
So, is Upstart's AI-driven lending model truly resilient, or is the market missing something crucial? What do you think? Share your thoughts in the comments and let's discuss!
