2 AI stocks down more than 80% to buy before it’s too late

Artificial intelligence (AI) is expected to deliver the biggest boost to worker productivity since the adoption of the PC in the 1990s, and like shareholders of the top tech companies that have emerged since that time, investors could reap tremendous returns if I have the right AI. stocks.

If you’re looking for the “right” AI actions, here are two to consider. Once the headwinds are removed, growth could explode for these two companies and send their stock prices higher.

1. UiPath

One of the ways companies use AI is to automate tasks. Companies can get much more value out of their employees’ time by using AI-based software to take over tasks like extracting information from dense documents, connecting to applications, filling out forms, and many other use cases. This is a huge opportunity for the automation specialist UiPath (WAY -2.18%)which estimates its long-term addressable market at $60 billion.

As of 2021, UiPath’s revenue has doubled to over $1.3 billion. It has a huge growth track ahead of it, but the company’s growth has fallen short of expectations this year, sending the stock off highs.

The company began experiencing a sales slowdown earlier this year due to macroeconomic challenges, but this is affecting other software companies as well, not just UiPath. Management’s guidance calls for full-year revenue to grow approximately 8% year-over-year.

However, the stock could be stolen right now. The stock traded at a high valuation to an all-time high a few years ago, which contributed to the 86% haircut, but the stock looks oversold now. Wall Street typically punishes stocks of companies with a murky near-term outlook, but demand for automation software will continue to grow over the next few years and increase the value of UiPath’s business.

It’s a positive sign that UiPath’s larger customers continue to expand their product usage. Additionally, the company’s founder, Daniel Dives, has returned as CEO with a focus on improving the company’s profit margin.

With the stock trading at a modest price-to-free cash flow ratio of 22, investors could earn excellent returns once the software industry recovers.

2. Upstart Holdings

Financial services is another market where AI could be a game-changer, particularly in the areas of risk assessment and lending. This is a huge opportunity for Upstart Holdings (UPST -4.60%).

The company charges lending partners, such as banks, fees for using its AI lending marketplace. Its AI models are powered by over 1,600 variables and trained on over 58 million past refunds. It helps banks accurately assess a borrower’s risk profile, which can lead to more approvals and better repayment rates.

Upstart’s trailing-12-month revenue peaked at $1 billion in 2022, before a weak credit market cut its revenue in half over the past two years. Not surprisingly, the stock has fallen sharply and is currently down 90% from its previous peak.

However, Upstart has continued to train its AI models with more data, and this is starting to lead to improved growth prospects. The product has made huge strides in accuracy, fraud detection and automation, and these improvements are starting to show in the company’s financial results. Management expects a return to growth next quarter, with guidance calling for sequential revenue growth of 17%.

Using AI to improve credit profiling is a very complex process, and Upstart’s continued investment in its models leads to a substantial competitive advantage. Management said eight new lenders joined the platform in the last quarter, and other banks and credit unions continue to return — a sign that the lending market may be at the start of a recovery.

Shares surged 75% following the company’s recent earnings report, but are still trading at a deep discount. With Upstart Holdings at the start of a turnaround, investors could reap handsome returns over the next few years.