Top AI Stocks with Growth Potential: Roblox and Upstart
Artificial intelligence (AI) stocks are presenting numerous investment opportunities. With the rapid advancement of AI technology, several companies stand out due to their exceptional growth momentum and significant market potential. This article focuses on two AI stocks worth considering: Roblox and Upstart, both of which are part of my investment portfolio.
Roblox: Strong Growth and Future Potential
Roblox (NYSE: RBLX) continues to experience impressive growth. In the first quarter, the company’s bookings soared by 31% compared to the previous year, while free cash flow increased more than twofold to $426.5 million. The platform now boasts nearly 98 million daily active users (DAUs), a rise of 26% year-over-year. Notably, paying users are increasing at an even higher rate of 29%, surpassing management’s guidance.
Looking ahead, Roblox’s management aims to reach 1 billion active users, more than ten times its current size. Achieving this goal while enhancing profit margins could yield significant returns for investors.
Various catalysts could propel Roblox forward. A new affiliate program may attract more content creators, and the AI capabilities within its platform pose vast opportunities. Furthermore, management has explored potential applications beyond gaming, such as in e-commerce and academic settings. According to Fortune Business Insights, the global metaverse market could expand tenfold between 2024 and 2032, suggesting that Roblox may experience similar growth.
Upstart: AI-Driven Lending Innovations
Upstart (NASDAQ: UPST) is currently trading around 88% below its all-time high from 2021. Despite this, the company’s fundamentals have strengthened significantly. Upstart leverages proprietary AI models to facilitate loan approvals for third-party banks. In the fourth quarter of 2024, the company reported a 56% year-over-year revenue increase, with adjusted EBITDA hitting $38.8 million, up from less than $1 million in the same quarter last year. Upstart anticipates achieving its first billion-dollar revenue year in 2025, even surpassing peaks during the pandemic when loan demand was exceptionally high.
Notably, Upstart’s lending approach outperforms traditional FICO models in estimating risk. While the personal loan sector presents room for growth, the new verticals in auto lending and home equity lines of credit (HELOCs) offer even more promise. The auto loan market is over four times larger than personal loans, and U.S. homeowners currently hold about $35 trillion in home equity, intensified by rising property values and high interest rates.
These two newer markets account for less than 4% of Upstart’s overall volume, yet recent data shows consecutive quarter increases in auto loan and HELOC origination volumes of 61% and 59%, respectively. If interest rates decline in the coming years, as many experts predict, Upstart’s growth trajectory could significantly accelerate.
Investment Considerations for Roblox
Before investing in Roblox, consider the following:
The Motley Fool Stock Advisor analyst team recently identified their top 10 stocks, and Roblox is not included in this list. The stocks that made the cut are positioned for substantial returns in the coming years.
The historical performance of featured stocks highlights the potential: For example, investing $1,000 in Netflix from a similar recommendation back in December 2004 would yield about $623,685 today. Similarly, an investment in Nvidia from April 2005 would be worth approximately $701,781.
As a point of reference, Stock Advisor boasts an average return of 906%, significantly outperforming the S&P 500 at 164%. Staying informed about the latest recommendations could present valuable investment opportunities.
Matt Frankel holds positions in Roblox and Upstart. The Motley Fool has positions in and recommends both companies. The Motley Fool maintains a disclosure policy.
The views expressed here are solely those of the author and do not necessarily represent those of Nasdaq, Inc.
