Like Opendoor’s, Upstart’s business was struggling back in 2022, but the company revamped its business with the help of an improved AI model that increased conversion rates for its loans. Even in a high-interest-rate environment, it’s delivering strong revenue growth. And it’s now profitable based on generally accepted accounting principles (GAAP).

Revenue in the second quarter jumped 102% to $257 million, on a 159% increase in transaction volume. The company reported GAAP net income of $5.6 million, and for the full year, it expects that to be $35 million.

Upstart built its business around consumer loans, but it’s been expanding rapidly into auto and home loans. The home loan market, where it could potentially compete with Opendoor, is massive. In the second quarter, Upstart’s home originations grew nearly 800% from the year-ago quarter to $68 million. That’s still a small fraction of its business, but there’s clearly more growth ahead in the home loan market for Upstart.

Upstart and Opendoor have similar market caps following Opendoor’s surge. Upstart is valued at $6.1 billion as of Friday, while Opendoor’s market cap is $6.7 billion.

Both companies are also chasing massive addressable markets, and are likely to benefit from lower interest rates.

However, Upstart is the only one of the two that has proven it can grow in a challenging macro environment, and its business now looks set for consistent profitability. At Opendoor, meanwhile, there are real questions about whether home-flipping can scale up as a business model and deliver a consistent profit. Notably, both Zillow Group and Redfin (a subsidiary of Rocket Companies) bowed out of the iBuying competition, finding it too difficult and prone to large losses.

Given those differences, despite the fanfare over Opendoor, Upstart looks like the better bet today. Over the next three years, Upstart looks set to be the winner of the two.

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Jeremy Bowman has positions in Carvana, Rocket Companies, Shopify, and Upstart. The Motley Fool has positions in and recommends Shopify, Upstart, and Zillow Group. The Motley Fool recommends Nasdaq and Rocket Companies. The Motley Fool has a disclosure policy.

Prediction: This Artificial Intelligence (AI) Stock Will Beat Opendoor Technologies over the Next 3 Years was originally published by The Motley Fool