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These Artificial Intelligence (AI) Stocks Are Quietly Outperforming the Market

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Artificial intelligence (AI) has dominated the stock market since the launch of ChatGPT in late 2022. At that time, the S&P 500 was in a bear market following the post-pandemic hangover and a spike in inflation. But since then, the broad market index has jumped by more than 50%.

By now, investors are well aware of the top-performing AI stocks like Nvidia and Palantir, but there are other stocks that have more quietly been outperforming the market. Let’s take a look at two of them.

Image source: Getty Images.

1. Upstart

Upstart (UPST 0.49%) was a big winner following its initial public offering (IPO) in December 2020 as the stock skyrocketed during the pandemic in 2021. However, in the bear market that followed, Upstart stock plunged 97% as rising interest rates crushed its lending business (the company operates as an AI-driven online lending platform).

The stock was largely forgotten by investors, but Upstart has made a number of improvements to its business by introducing a new, more advanced AI model that has improved its conversion rates, and moving further into large lending markets like the home and auto sectors. Along the way, it’s quietly staged a comeback, and the stock has jumped 175% over the last year (at the time of this writing).

Upstart has more upside potential as the stock’s market cap is just $6 billion, and it is trying to disrupt a massive market, competing with traditional FICO scores. According to Upstart, the company’s AI-based lending model achieves significantly better results than the FICO score, and the business is growing rapidly with profitability improving.

In the first quarter, revenue was up 67% to $213 million on an 89% increase in originations to $2.1 billion. It also reported a 19.1% conversion rate, up from 14% in the quarter a year ago. On the bottom line, its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) came in at $43 million, up from a loss of $20 million in the quarter a year ago. The company also expects to be profitable on a generally accepted accounting principles (GAAP) basis this year.

Overall, Upstart still has a large growth opportunity in front of it as credit is a massive market. If it continues to execute, the stock should outperform over the coming years, and further technology improvements could drive an inflection point in the stock.

2. Lemonade

Another overlooked AI stock that is suddenly soaring is Lemonade (LMND 0.88%), the AI-based insurance company.

Like Upstart, Lemonade had a successful IPO during the pandemic and then plunged in 2022 due to ongoing losses, slowing growth, and shifting market sentiment.

However, Lemonade has now mounted a comeback on improving results and a new goal of reaching profitability by 2027. As a result, the stock is now up 160% over the last year. In particular, the stock soared last November after a strong earnings report and an Investor Day conference that pleased investors.

In its most recent earnings report, Lemonade reported an acceleration in force premium growth at 27% to $1.01 billion. Total customers rose 21% to 2.55 million. Its gross loss ratio over the last four quarters was steady at 73%, meaning 73% of its revenue went to paying claims.

Lemonade also shared in the Investor Day conference that it expects to be adjusted EBITDA profitable by 2026 and GAAP net income profitable by 2027.

Lemonade still has some challenges to overcome, and there’s always the risk of a disaster like the California wildfires, which weighed on Q1 results, but management’s efforts to streamline its business seem to finally be paying off.

At a market cap of $3 billion, the stock could easily double from here, especially if Lemonade executes on its plan to turn profitable.

Jeremy Bowman has positions in Nvidia and Upstart. The Motley Fool has positions in and recommends Lemonade, Nvidia, Palantir Technologies, and Upstart. The Motley Fool has a disclosure policy.



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How to Choose Between Deploying an AI Chatbot or Agent

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In artificial intelligence, the trend du jour is AI agents, or algorithmic bots that can autonomously retrieve data and act on it.

But how are AI agents different from AI chatbots, and why should businesses care?

Understanding how they differ can help businesses choose the right solution for the right job and avoid underusing or overcomplicating their AI investments.

An AI chatbot or assistant is a program that uses natural language processing to interact with users in a conversational way. Think of ChatGPT. It can answer questions, guide users and simulate dialogue.

Chatbots only react to prompts. They don’t act on their own or carry out multistep goals. They are helpful and conversational but ultimately limited to what they’re asked.

An AI agent goes a step further. Like a chatbot, it can understand natural language and interact conversationally. But it also has autonomy and can complete tasks. It is proactive.

Instead of just replying, an AI agent can make decisions, take actions across systems, plan and carry out multistep processes, and learn from past interactions or external data.

For example, imagine a travel platform. An AI chatbot might help a user plan their travel itinerary. An AI agent, on the other hand, could do more, such as:

  • Understand the request, such as booking a flight to Los Angeles.
  • Search multiple airline sites.
  • Compare flight options based on user preferences.
  • Book the flight.
  • Send a confirmation email.

All of this could happen without the user needing to click through a series of links or speak to a human agent. AI agents can be embedded in customer service, HR systems, sales platforms and the like.

Read also: Understanding the Difference Between AI Training and Inference

Why Businesses Should Care

Knowing the difference can help a business plan more strategically. AI chatbots use less inference than AI agents and therefore are more cost-effective. Moreover, businesses can use AI chatbots and AI agents for very different outcomes.

AI chatbot use cases include the following:

  • Customer service
  • Data retrieval
  • Planning and analysis
  • Basic IT support
  • Conversation
  • Writing documents
  • Code generation

AI agent use cases include the following:

  • Automated checkout
  • Automated content curation
  • Travel and reservation execution tasks
  • Shopping and payment processing

AI chatbots and AI agents both use natural language and large language models, but their functions are different. Chatbots are answer machines while agents are action bots.

For businesses looking to improve how they serve customers, streamline operations or support employees, AI agents offer a new level of power and flexibility. Knowing when and how to use each tool can help companies make smarter AI investments.

To choose between deploying an AI chatbot or AI agent, consider the following:

  • Budgets: AI chatbots are cheaper to run since they use less inference.
  • Complexity of use case: For straightforward tasks, use a chatbot. For tasks that need multistep coordination, use an AI agent.
  • Skilled talent: Assess the IT team’s ability to handle chatbots versus agents. Chatbots are easier to deploy and update. AI agents require more advanced machine learning, natural language processing and other skills.

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Do AI systems socially interact the same way as living beings?

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Key takeaways

  • A new study that compares biological brains with artificial intelligence systems analyzed the neural network patterns that emerged during social and non-social tasks in mice and programmed artificial intelligence agents.
  • UCLA researchers identified high-dimensional “shared” and “unique” neural subspaces when mice interact socially, as well as when AI agents engaged in social behaviors.
  • Findings could help advance understanding of human social disorders and develop AI that can understand and engage in social interactions.

As AI systems are increasingly integrated into from virtual assistants and customer service agents to counseling and AI companions, an understanding of social neural dynamics is essential for both scientific and technological progress. A new study from UCLA researchers shows biological brains and AI systems develop remarkably similar neural patterns during social interaction.

The study, recently published in the journal Nature, reveals that when mice interact socially, specific brain cell types create synchronize in “shared neural spaces,” and artificial intelligence agents develop analogous patterns when engaging in social behaviors.     

The new research represents a striking convergence of neuroscience and artificial intelligence, two of today’s most rapidly advancing fields. By directly comparing how biological brains and AI systems process social information, scientists can now better understand fundamental principles that govern social cognition across different types of intelligent systems. The findings could advance understanding of social disorders like autism while simultaneously informing the development of more sophisticated, socially  aware AI systems.  

This work was supported in part by , the National Science Foundation, the Packard Foundation, Vallee Foundation, Mallinckrodt Foundation and the Brain and Behavior Research Foundation.

Examining AI agents’ social behavior

A multidisciplinary team from UCLA’s departments of neurobiology, biological chemistry, bioengineering, electrical and computer engineering, and computer science across the David Geffen School of Medicine and UCLA Samueli School of Engineering used advanced brain imaging techniques to record activity from molecularly defined neurons in the dorsomedial prefrontal cortex of mice during social interactions. The researchers developed a novel computational framework to identify high-dimensional “shared” and “unique” neural subspaces across interacting individuals. The team then trained artificial intelligence agents to interact socially and applied the same analytical framework to examine neural network patterns in AI systems that emerged during social versus non-social tasks.

The research revealed striking parallels between biological and artificial systems during social interaction. In both mice and AI systems, neural activity could be partitioned into two distinct components: a “shared neural subspace” containing synchronized patterns between interacting entities, and a “unique neural subspace” containing activity specific to each individual.

Remarkably, GABAergic neurons — inhibitory brain cells that regulate neural activity —showed significantly larger shared neural spaces compared with glutamatergic neurons, which are the brain’s primary excitatory cells. This represents the first investigation of inter-brain neural dynamics in molecularly defined cell types, revealing previously unknown differences in how specific neuron types contribute to social synchronization.

When the same analytical framework was applied to AI agents, shared neural dynamics emerged as the artificial systems developed social interaction capabilities. Most importantly, when researchers selectively disrupted these shared neural components in artificial systems, social behaviors were substantially reduced, providing the direct evidence that synchronized neural patterns causally drive social interactions.

The study also revealed that shared neural dynamics don’t simply reflect coordinated behaviors between individuals, but emerge from representations of each other’s unique behavioral actions during social interaction.

“This discovery fundamentally changes how we think about social behavior across all intelligent systems,” said Weizhe Hong, professor of neurobiology, biological chemistry and bioengineering at UCLA and lead author of the new work. “We’ve shown for the first time that the neural mechanisms driving social interaction are remarkably similar between biological brains and artificial intelligence systems. This suggests we’ve identified a fundamental principle of how any intelligent system — whether biological or artificial — processes social information. The implications are significant for both understanding human social disorders and developing AI that can truly understand and engage in social interactions.”

Continuing research for treating social disorders and training AI

The research team plans to further investigate shared neural dynamics in different and potentially more complex social interactions. They also aim to explore how disruptions in shared neural space might contribute to social disorders and whether therapeutic interventions could restore healthy patterns of inter-brain synchronization. The artificial intelligence framework may serve as a platform for testing hypotheses about social neural mechanisms that are difficult to examine directly in biological systems. They also aim to develop methods to train socially intelligent AI.

The study was led by UCLA’s Hong and Jonathan Kao, associate professor of electrical and computer engineering. Co-first authors Xingjian Zhang and Nguyen Phi, along with collaborators Qin Li, Ryan Gorzek, Niklas Zwingenberger, Shan Huang, John Zhou, Lyle Kingsbury, Tara Raam, Ye Emily Wu and Don Wei contributed to the research.



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I tried recreating memories with Veo 3 and it went better than I thought, with one big exception

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If someone offers to make an AI video recreation of your wedding, just say no. This is the tough lesson I learned when I started trying to recreate memories with Google’s Gemini Veo model. What started off as a fun exercise ended in disgust.

I grew up in the era before digital capture. We took photos and videos, but most were squirreled away in boxes that we only dragged out for special occasions. Things like the birth of my children and their earliest years were caught on film and 8mm videotape.



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