2 Millionaire-Maker Artificial Intelligence (AI) Stocks

Key Points

• The online lending platform Upstart is leveraging AI to improve its conversion rate.

• Sweetgreen's Infinite Kitchen could be a differentiator among fast-casual chains.

• 10 stocks we like better than Upstart ›

You might call the current bull market the artificial intelligence (AI) bull market.

High hopes for the new technology were kick-started by the release of OpenAI's ChatGPT in November 2022, and AI stocks have been flying higher ever since.

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By now, investors are familiar with big AI winners like Nvidia and Palantir. But there are smaller stocks that could also soar amid the revolutionary new technology. Let's take a look at two of them.

Image source: Getty Images.

1. Upstart

Upstart Holdings (NASDAQ: UPST) isn't your typical AI stock. Rather than using artificial intelligence in semiconductors or software, Upstart is employing AI in credit-scoring models. The company is a lending platform using AI to determine creditworthiness. It originates loans and then sells them to its partners, removing the risk of keeping them on its balance sheet.

According to Upstart, its credit-scoring method is significantly better than traditional FICO scores. For instance, borrowers who receive Upstart's worst risk grade are six times more likely to default than those who receive the best. For FICO scores, that difference is just two times, showing Upstart's model does a better job of segmenting borrowers.

Upstart uses AI in a number of ways. It helps automate its loans, meaning applicants get approvals or disapprovals without a human intervening in the process. In the first quarter of 2025, 92% of its loans were fully automated, a new record for the company.

AI also drives Upstart's credit-scoring model, and it continues to make improvements in it. In the first quarter, the company added embedding algorithms into its underwriting model. Embedding converts unstructured data into useful inputs for its model, helping to identify similarities between users of different credit cards. An improvement in its credit-scoring model has also helped improve conversion rates, which rose from 14% to 19.1% in the first quarter.

Upstart has converted those AI advances into improved financial results, even during a period when interest rates have weighed on loan demand. In the first quarter, revenue jumped 67% year over year to $213 million, and its net loss under generally accepted accounting principles (GAAP) improved from $64.6 million to $2.4 million.

Upstart currently has a market cap of $8 billion and competes in a huge addressable market, setting it up for potentially explosive growth due to its rapid revenue increase and improving margins. The company estimates the total addressable market for the loans it's competing for to be $3 trillion, and it's expanding rapidly into large lending markets like auto and home. If it maintains strong growth and margins continue to improve, the stock could be a ten-bagger over time, turning $100,000 invested today into $1 million.

2. Sweetgreen

A restaurant chain might not fit your idea of a typical AI stock, but Sweetgreen (NYSE: SG) is an exception -- the company has made its automated Infinite Kitchen system a defining part of its strategy.

The Infinite Kitchen, which is being added to more restaurants (both new and existing ones), automatically dispenses salad ingredients and assembles bowls. Locations with an Infinite Kitchen have reported at least 7 percentage points in labor savings and 1 percentage point improvement in cost of goods sold. One restaurant also saw a 15% increase in comparable-store sales (comps) on digital lines. The technology is helping Sweetgreen save money on labor costs and improve its throughput and customer service, growing revenue as well.

The deployment of its Infinite Kitchens is just beginning, so they haven't had a significant effect on the business yet, but their potential could be huge, especially if they can help Sweetgreen control prices, which seems to be the top source of customer complaints. If the Infinite Kitchen concept can help accomplish that while speeding up service and controlling labor costs, it could make the chain a big winner.

Currently, the stock is down sharply after reporting a comps decline in the first quarter and broader concerns about the economy and consumer sentiment. However, that gives Sweetgreen a lot of upside if it can mount a recovery, return to growth, and deliver a profit.

The company expects to grow from a base of around 250 restaurants currently to at least 1,000 locations, and its average unit volumes are strong at $2.9 billion. Given the valuations of more established chains like Chipotle, a 10x gain over time is reasonable if Sweetgreen executes well on its growth plan. That would turn $100,000 invested in it into $1 million.

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Jeremy Bowman has positions in Chipotle Mexican Grill, Sweetgreen, and Upstart. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Upstart. The Motley Fool recommends Fair Isaac and Sweetgreen and recommends the following options: short September 2025 $60 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.