After a plunge in April on the "Liberation Day" tariffs, artificial intelligence (AI) stocks largely bounced back in May. Stocks like Nvidia are not far from their all-time highs, and Palantir even set a new all-time high.
Investors seem to have put concerns about a trade war or even a recession in the back of their minds. Many are back to focusing on the AI boom, which is still moving full speed ahead as big tech companies are plowing tens of billions of dollars into capital expenditures for new data centers to run AI programs.
However, despite the recent recovery, some AI stocks are still on sale. Let's take a look at two of them worth buying on the dip.
Image source: Getty Images.
1. Amplitude
One overlooked AI stock is Amplitude (AMPL 2.77%). The software-as-a-service company, which focuses on product analytics, has been largely forgotten after its pandemic-driven boom faded. Its customers scaled back on tech spending, realizing that the conditions during the pandemic were temporary, and its growth slowed dramatically.
However, Amplitude has since regrouped and built out its platform to offer a complete suite of tools that its customers need to assess how their customers are using their products and how they can be improved. They include features like guides and surveys, which use pop-up bubbles on a website to offer users help or ask how they like the experience, and session replay, which allows companies to see how users moved through a website or app.
NASDAQ: AMPL
Key Data Points
On June 10, Amplitude is taking a major step forward into AI with the launch of AI agents. These tools will provide insights and suggest changes for Amplitude customers, making it even easier for those businesses to figure out what's working with their products and how to improve them.
Additionally, the agents can do things like create hundreds of variants of the same website to see which performs the best.
Amplitude has a market cap of just $1.6 billion, and competes with Alphabet's Google Analytics and Adobe Analytics, meaning it could make significant market share gains if its new AI agents resonate with its customers. While the stock has delivered gains this year, it's still down 85% from its all-time high.
2. Upstart
Like Amplitude, Upstart (UPST 2.95%) soared in 2021 on pandemic-driven tailwinds, but then crashed as rising interest rates and fears of a recession crushed the credit platform, which aims to disrupt FICO scores and traditional credit measure with new AI-based technology.
Upstart's latest model, Model 18, makes as many as 1 million predictions per applicant so the company can gain the best assessment of credit risk possible. As a result of that technology, Upstart's model is able to achieve fewer defaults and more approvals with the same level of risk.
NASDAQ: UPST
Key Data Points
That improvement in technology is paying off in the financial results. Upstart's conversion rate jumped from 14% to 19.1%, driving revenue up 67% to $213 million in the first quarter. On the bottom line, the company reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $42.6 million, up from a loss of $20.3 million in the quarter a year ago. Upstart expects to deliver a generally accepted accounting principles (GAAP) profit for the second year in a row.
In addition to the strong overall growth, Upstart is beginning to ramp up its business in the massive auto and home loan markets. While they are still small, its auto loan origination business grew by five times and home loan originations grew by six times year over year, to $61 million and $41 million, respectively. Those loans are also more attractive to its lending partners than the unsecured personal loans that make up the vast majority of its businesses.
Upstart has recovered somewhat from its post-pandemic lows, but at the time of this writing, the stock is down 44% from its 52-week high and 87% from its all-time peak.
As its AI-fueled improvements kick in, Upstart looks like a smart buy.
