Market Madness Round 2: Upstart vs NVIDIA - 7investing 7investing

Market Madness Round 2: Upstart vs NVIDIA

In this second-round matchup, the consumer-lending platform goes head-to-head against the AI chipmaker.

March 21, 2023

Welcome to our 7investing Market Madness competition!

Throughout this campaign, we’re matching popular stocks up against one another to determine which will be the best investment over the next three years. And then, by voting in the poll at the bottom of the article, you can help us determine which stock will go on to the next round.

Our first round is now completed and it was quite eventful. By the numbers, we saw upsets in six of the eight pairings. As a reminder, our rankings are based upon 2022 performance — where the top seed had the highest total investing return last year. And our scores/outcomes correspond to the actual voting results that came from our interactive Twitter polls.

Here is a full recap of our first round matchups and where we stand today:

  1. UPSET: Upstart Holdings (our #16 seed) defeated Exxon Mobil (#1 seed), 71-29
  2. AbbVie (#2) defeated Coinbase (#15), 65-35
  3. UPSET: SoFi Technologies (#14) defeated Microsoft (#3), 57-43
  4. UPSET: Tesla (#13) defeated Moderna (#4), 76-24
  5. Apple (#5) defeated Meta Platforms (#12), 61-39
  6. UPSET: Datadog (#11) defeated Alphabet (#6), 62-38
  7. UPSET: Advanced Micro Devices (#10) defeated Disney (#7), 76-24
  8. UPSET: NVIDIA (#9) defeated Intel (#8), 66-34

Our first-round voting results suggest there is hope for a market recovery. 2022 was a market that rewarded stable Blue Chips (which is why Exxon, AbbVie, and Microsoft drew the top three seeds) but often punished smaller-cap and higher-beta stocks. It appears our voting audience has a much more bullish tone for the stock market’s upcoming three years.

On to the Second Round

Our March tournament marches onward, and our second-round matchups are quite a bit harder! The winners of the first round now go head-to-head in our Elite Eight pairings:

  1. Upstart Holdings (#16) vs NVIDIA (#9)
  2. Apple (#5) vs Tesla (#13)
  3. Datadog (#11) vs SoFi Technologies (#14)
  4. AMD (#10) vs AbbVie (#2)

In this second-round matchup, the AI-powered consumer lending platform Upstart Holdings (Nasdaq: UPST) squares up against the innovative chipmaker NVIDIA (Nasdaq: NVDA).

7investing advisor Anirban Mahanti was quick to point out that Upstart’s dismal 2022 performance was a result of a terrible macroeconomic environment. Weak consumer lending constrained its funding partners and dried up fee-based revenues. Rising interest rates have concurrently made Upstart’s income-generating securitized loans less attractive and also reducing its own loan-funding capacity.

However, there may be light emerging from the end of the tunnel. Upstart has right-sized its cost structure and its limited fixed costs have it well-positioned to ride out the storm. Expansion into the auto loan market could provide upside, and its excessive 30%+ short interest could serve as a catalyst to the stock price if the macro does, in fact, turn around.

Luke Hallard made the case that NVIDIA’s graphics processing units are the key to unlocking an important new wave of artificial intelligence. The company’s outsized Data Center revenue growth is just scratching the surface of AI’s potential of becoming an essential capability for businesses of all sizes to eventually compete successfully.

NVIDIA does suffer to some degree from long hardware development cycles which could result in inventory builds if there’s a mismatch between company supply and customer demand. And its reliance on Taiwan Semiconductor as the manufacturer of its cutting-edge chips introduces a long-tail geopolitical risk, especially as tensions are rising between Taiwan and China.

Yet NVIDIA’s sustainable growth in data center computing and its upside potential from autonomous vehicles suggest that this market leader could have plenty more innovation for decades to come.

Cast Your Vote!

Which of these two stocks do you believe will provide the greater forward three-year return? Cast your vote in our poll below!

Our Market Madness tournament is in support of our new 7investing Starter membership, which we are giving away free during the entire month of March. To learn more about Starter — including how and why it’s already outperforming the S&P by 18 percentage points (as of today, March 21st) — click here to automatically apply your “madness” promo code and to get started today!

Join 7investing's Free Email List

Already a 7investing member? Log in here.