Artificial Intelligence (AI) is becoming more prevalent in today’s society, reaching industries that many investors would not have thought of. Derry & CoFor example, AI and machine learning for tractors are brought in with a fully autonomous tractor that can plow, harvest and sow crops without a driver.
With Deere, among other companies, AI is clearly making its way into almost every part of our world, and there are three companies you can invest in today that I think might be the best companies to take advantage of.
upstart holding (NASDAQ: UPST) It brings AI to a very old market: loan decisions. for decades, Adel Isaac Loan determination space ruled with a FICO score, but it’s a flawed system. Every day many people are prevented from getting prime credit due to simple mistakes, and the big banks end up losing loans that could have made them a penny. Upstart is trying to change this and offer seed credit to a larger group of the population by using artificial intelligence instead of a FICO score to determine creditworthiness.
Most large banks use only a few variables to determine loan eligibility, but Upstart uses thousands of variables and data from more than 10 million previous loan decisions to do so — making it safe to assume Upstart is taking a closer look at its competitors. In an internal study, Upstart found that its identification engine could agree to increase the number of consumers by 173% with the same loss rate as other banks.
The company still has to go through a full credit cycle, so it still has a lot to prove, but the initial results are incredibly positive. Beginners can automatically agree to 67% of decisions, which helps the company turn profits. In the third quarter, it generated net income of $29 million while its top streak grew 250%.
A profitable, fast-growing company that has seen incredible success disrupt its industry will demand a high rating, and Upstart is no exception. The company trades at 17x sales, and while this is somewhat pricey, it’s much cheaper than the 60x sales that traded just three months ago.
Upstart has developed a highly accurate AI engine today that could become a new industry standard in the next five years. With a little innovation in this area, the company will likely rise to the top and take on the FICO score as the primary loan-determining tool, and that could mean great things for investors over the next decade.
If you thought there was no more boring industry than the loan-selecting market, think again. Lemonade (NYSE: LMND) It disrupts one of the oldest and most boring industries in the United States: insurance. Lemonade has been one of the fastest insurance companies ever to reach 1 million customers, due to its new approach to insurance that focuses heavily on artificial intelligence.
Lemonade uses artificial intelligence to approve customer requests and claims within minutes, and the company makes it easy to apply for a claim with just a few photos of the situation. This painless process fueled by artificial intelligence resulted in a Net Promoter Score – which measures customer satisfaction on a scale of 100 to 100 – of 47. This is very high when compared to other insurance companies such as celestials, which gets minus 15 points.
Lemonade also has a unique business model that coordinates its incentives with customers. Lemonade only receives a flat fee from each customer rather than all the rest of the claims, eliminating the company’s incentive to reject as many claims as possible. In addition, the company gives the remaining funds to charities. This is a complete deviation from the insurance industry’s “traditional” way of doing things, but a company can thrive when its incentives align with its customers. With such competitive advantages and the rate at which Lemonade is certified, I’m excited to be a contributor for the next decade and beyond.
Lemonade and Upstart are seeing amazing success, but you might want to consider a broader AI investment strategy with nvidia (NASDAQ: NVDA). Nvidia has become a highly sought after chip manufacturer, famous for its high-performance graphics processing units (GPUs) that are heavily used in the AI industry.
Having this pick-and-shovel game will not only allow you to get the benefits of artificial intelligence, but also cloud computing, metaverse, and many other growing industries. As a leading chip maker in these places, the company has done well financially. Revenue topped $7 billion, grew 50% year over year, and free cash flow grew 62% to nearly $1.3 billion in the third quarter.
No one can deny that these financial statements are amazing, and that the company’s chance is a chance for them to lose. As an industry leader in many future industries, it should come as no surprise that the company also has an expensive valuation. The company trades at 84 times earnings, but with a company like Nvidia, it might be worth paying for it.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.