AI Stocks Recover, But These Two Remain Undervalued
After a significant decline in April due to ‘Liberation Day’ tariffs concerns, artificial intelligence (AI) stocks have largely rebounded in May. Companies like Nvidia have nearly returned to their all-time highs, while Palantir has achieved a new peak. Investors appear to have shifted their focus back to the AI boom, driven by major tech companies investing tens of billions in capital expenditures for new data centers to support AI programs.
Despite this recovery, some AI stocks continue to offer buying opportunities at discounted prices. Let’s examine two such stocks worth considering.
1. Amplitude: An Overlooked AI Gem
Amplitude (AMPL -6.73%) is a software-as-a-service company specializing in product analytics that has been overshadowed since its pandemic-fueled growth subsided. As customers reduced their tech spending upon realizing the pandemic conditions were temporary, Amplitude’s growth slowed significantly. However, the company has since revamped its platform to provide a comprehensive suite of tools for assessing customer product usage and identifying areas for improvement.
Amplitude’s offerings now include features such as guides, surveys using pop-up bubbles on websites, and session replay, allowing companies to analyze user interactions. On June 10, Amplitude is launching AI agents that will provide insights and suggest changes for its customers, enhancing their ability to optimize their products. These agents can even create multiple variants of a website to determine which performs best.
With a market capitalization of $1.6 billion and competition from Alphabet’s Google Analytics and Adobe Analytics, Amplitude has potential for significant market share gains if its new AI agents are well-received. Despite year-to-date gains, the stock remains 85% below its all-time high.
2. Upstart: AI-Driven Credit Platform
Similar to Amplitude, Upstart (UPST -4.83%) experienced a surge in 2021 due to pandemic-related factors but faced a downturn as interest rates rose and recession fears mounted. Upstart’s credit platform aims to revolutionize traditional credit scoring with AI-based technology. Its latest model, Model 18, generates up to 1 million predictions per applicant to accurately assess credit risk.
This advanced technology has led to fewer defaults and more approvals at the same risk level. The results are evident in Upstart’s financial performance: its conversion rate increased from 14% to 19.1%, driving revenue up 67% to $213 million in the first quarter. The company reported adjusted EBITDA of $42.6 million, a significant improvement from the loss of $20.3 million in the same quarter the previous year.
Upstart is also expanding into the auto and home loan markets, with its auto loan origination business growing fivefold and home loan originations increasing sixfold year-over-year to $61 million and $41 million, respectively. These loans are more attractive to lending partners than unsecured personal loans.
Although Upstart has recovered somewhat from its post-pandemic lows, it remains 44% below its 52-week high and 87% from its all-time peak. As its AI-driven improvements take effect, Upstart appears to be a prudent investment choice.
