JAlmost everyone knows that artificial intelligence (AI) is taking hold in many parts of our life. What most people are referring to when they say AI is actually machine learning (ML): the use of algorithms to mimic the way humans acquire information and gradually learn to make better predictions. accurate. Some companies are doing it better than others.
Three that are doing well are trading at attractive valuations right now. Parvenu (NASDAQ: UPST), Microsoft (NASDAQ: MSFT)And JP Morgan hunting (NYSE: JPM) they are all market leaders who invest heavily in AI innovation. Now may be a good time to collect stocks. Here because.
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1. Parvenu
Upstart is trying to kill the credit score. More specifically, it is trying to show that the traditional loan decision assessment tool is outdated. The company is using AI and ML to help banks better assess potential borrowers. If banks can find customers that traditional models would have considered risky, but aren’t, they can increase their revenues without suffering more delinquencies. It’s like discovering a completely untapped market right under your nose.
So far it’s working. The partnership with Upstart allowed banks to lend to more borrowers at a lower interest rate. It’s great for everyone. This is why the Consumer Financial Protection Bureau has issued a letter of non-action in favor of the company’s approach.
Upstart is expanding access to credit, particularly for those with limited credit history. Tests from the office found that applicants under the age of 25 were 32% more likely to be approved for a loan. They weren’t risky; they simply hadn’t borrowed enough in the past to satisfy the credit bureaus.
The model uses more than 1,500 variables and balances the bank’s desired fees and acceptable risk with the potential for fraud, prepayment and other applicant outcomes. It has continued to improve since 2014. Two years after Upstart was founded by former executive Dave Girouard Google And Apple.
The business has been hugely successful so far. Revenue in 2021 increased by 264% over the previous year. And the company generated both earnings and free cash flow. It is expected to do the same this year, increasing sales by at least 65%.
Despite this, the stock is 75% off its highs. It is one of the many overgrowth stocks that have been squashed this year. For investors with a stomach for volatility, the current free cash flow multiple shows that now may be a good time to add it to a diversified portfolio.
UPST Free Cash Flow Price. YCharts data.
2. Microsoft
With a market cap of over $ 2 trillion and $ 125 billion in cash in its balance sheet, it makes sense that this tech titan is investing heavily in AI. IS. The company known for its productivity software, cloud services and games is second only to IBM (and before Alphabet‘s Google) with over 2,200 AI patents.
Microsoft is clearly committed to driving through artificial intelligence. Two of its five product development groups – Cloud and AI, as well as AI and Research – are focused on applying technology. It also focuses on developers. Last year Microsoft bought the popular GitHub open source code repository for $ 7.5 billion. In addition, its machine learning studio and Azure workbench for building ML models are helping turn every developer into an AI professional.
Microsoft is also leveraging AI to push further into healthcare. It recently completed the acquisition of natural language processing (NLP) company Nuance Communications, a major player in healthcare voice-to-text software. An example of how this technology could be applied is in the company’s support for cancer research. Use ML and NLP to help oncologists identify a personalized treatment plan by sorting out all available research and data. It is also pairing ML with radiologists to better understand tumor growth.
The stock may not be in the bargain basket, but it is trading at the bottom of the price-to-sell (P / S) range established at the start of the pandemic. Analysts expect earnings of $ 9.34 per share for this fiscal year, which ends in June. This means that the current share price of $ 300 will match the lowest P / S ratio since the initial recovery from the coronavirus sell-off. In a turbulent market, it is difficult to find a more reliable company that still produces cutting-edge technologies.
P / E MSFT ratio. YCharts data.
3. JPMorgan Chase
Aside from one standard phrase, the largest financial institution in the United States does not mention AI or ML in its latest annual Securities an Exchange Commission statement. But that doesn’t mean it’s not a key part of the bank’s strategy. The firm has operations ranging from investment banking, retail banking, consumer credit, credit cards, wealth management and more. This generates a lot of data. And getting the most out of that data means keeping it up to date with colleagues.
The bank uses artificial intelligence and machine learning to evaluate deals, detect anomalies in spending to detect fraud and evaluate research methods, and how to help portfolio managers better process new information. The company is also applying AI to better understand customer inquiries and offer intelligent assistance to improve customer service.
The title followed the S&P 500 index in virtually any time frame since the 2008-2009 financial crisis. Low interest rates aren’t great for banks. And even as interest rates are rising rapidly, the combination of inflation, geopolitical instability and higher regulatory capital requirements has led to a relatively bleak outlook in CEO Jamie Dimon’s annual letter to shareholders.
However, with JPMorgan’s price-performance ratio back close to pre-pandemic level despite much higher gains, it’s time to take note.
JPM value from book price. YCharts data. TTM = last 12 months.
Add in the fact that the stock is close to the 52-week low and it looks like a bargain. If you’ve been wanting to raise blue chip bank stocks at a 3% dividend while they are down, now is the time.
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JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Jason Hawthorne owns Microsoft and Upstart Holdings, Inc. The Motley Fool owns and recommends Microsoft and Upstart Holdings, Inc. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.