Where Will Upstart Be in 5 Years?

Key Points

• Upstart shares have had a terrific 12 months, as investors have become more confident.

• Revenue increased 84% through the first six months of 2025, with loan volumes more than doubling.

• Shares currently price in huge expectations about the future.

• 10 stocks we like better than Upstart ›

When figuring out ways to invest in the artificial intelligence (AI) trend, you might think that the only way to go is to look at the "Magnificent Seven" businesses. However, some smaller companies, like Upstart (NASDAQ: UPST), are uniquely positioned to leverage AI in their respective industry niches.

Upstart shares trade 84% below their record (as of Sept. 12), set during the bull market of 2021. Nonetheless, they have climbed 75% in the past 12 months and 123% in the past three years, despite high levels of volatility. The company looks to be back on track to taking care of its investors.

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But where will this fintech stock be in five years?

Image source: Getty Images.

Finding greater adoption

There's no part of the economy that is fully protected from innovative and disruptive forces. Upstart proves this, as it's aiming to change how people borrow. The company uses a proprietary AI model to not only analyze repayment activity, but examine more than 2,500 different variables about potential borrowers to approve loans. The goal is to increase access to credit for more people.

Upstart is back in growth mode, after taking a hit in 2023 as interest rates rose. Through the first six months of 2025, revenue and loan volumes were up 84% and 121%, respectively. The business now has over 100 different partners using its technology.

Upstart launched its home equity line of credit (HELOC) product two years ago. This saw originations skyrocket 750% year over year in the second quarter. There's clearly huge demand. Even better, there's more than $30 trillion in untapped home equity in the U.S. Perhaps when interest rates start to decline, Americans will draw on this equity, which could support more activity on Upstart's platform.

The company has successfully navigated rapidly increasing interest rates and returned to growth. This bodes well for its future. Upstart could be a much larger business by the end of this decade.

Running into the big players

Management mentions that the total addressable market (TAM), including personal loans, small business loans, auto loans, and home loans, is more than $3 trillion in annual origination volume in the U.S. That's no doubt a massive figure, and it reveals just how large a playing field Upstart is operating in. Throughout its history, the business has originated $47.5 billion worth of loans, so it's a tiny fish swimming in an ocean.

Investors who are bullish on the company's long-term potential might believe that strong growth over many years is a virtual certainty. That might be the case, but I believe the ultimate upside will be significantly smaller than the TAM. Competitive forces will get in the way.

The majority of lending activity happens from the money-center banks, like JPMorgan Chase or Bank of America. Combined, these two entities have $2.6 trillion in loans on their balance sheets. This is a truly gargantuan sum, and it's a key revenue source that they won't give up. What's more, the big banks have deep pockets to invest aggressively in tech, data, and AI capabilities. Upstart's AI advantage might diminish over time, if there's a durable edge there at all.

Waiting for consistent profits

Upstart is slowly making a name for itself in the fintech market. Given its growth trajectory, there is meaningful upside over the next five years. Of course, Upstart will need to execute well to take advantage of the opportunity it sees.

One area of concern, however, is the valuation. The stock trades at 169 times management's forecasted net income of $35 million for 2025. It looks like the lofty expectations are already priced in.

Investors might want to practice caution right now. If there's a firm belief that earnings will be significantly higher in five years, then the stock might deserve a spot in your portfolio. That's not a guarantee, though.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and Upstart. The Motley Fool has a disclosure policy.