SoFi Technologies vs. Upstart: Which Fintech Stock Is the Better Long-Term Buy?

The fintech selloff has created a false equivalence between SoFi and Upstart that obscures fundamentally different business trajectories. While both stocks are down roughly 38% year-to-date, the underlying reasons and recovery prospects diverge sharply, particularly around their AI strategies and path to sustained profitability.

SoFi has evolved into a diversified financial services platform with three revenue streams: lending, financial services, and technology platform. The company achieved GAAP profitability in 2023 and has maintained it since, a critical inflection point that Upstart hasn't reached. SoFi's member growth continues accelerating, adding over 750,000 net new members in Q4 2024 alone, bringing total members above 9.8 million. This flywheel effect matters because cross-selling drives higher lifetime value and reduces customer acquisition costs. The company's adjusted net revenue grew 30% year-over-year in Q4, with particularly strong momentum in its technology platform segment serving other financial institutions.

Upstart's situation is more precarious. The company's AI-powered lending platform showed promise during the low-rate environment of 2020-2021, but the business model's interest rate sensitivity has proven severe. Upstart's revenue collapsed from $849 million in 2022 to $504 million in 2023 as rising rates strangled loan origination volumes. While the company touts its AI underwriting models as superior to FICO scores, the proof point that matters is whether lending partners maintain confidence during credit cycles. Several bank partnerships have been scaled back or terminated, raising questions about the stickiness of Upstart's platform when macro conditions deteriorate.

The AI angle here is critical but overstated in Upstart's case. Yes, Upstart uses machine learning for credit decisioning, but this hasn't translated into defensible competitive advantages or consistent profitability. The company remains unprofitable on a GAAP basis and burned through cash in recent quarters. SoFi also employs AI and machine learning across its lending operations, but it's embedded within a broader platform strategy rather than being the sole value proposition. This diversification provides ballast when any single segment faces headwinds.

Looking at valuation, both stocks trade at depressed multiples relative to their 2021 peaks, but the risk-reward calculus differs. SoFi's path to expanding margins seems clearer as operating leverage kicks in across its platform. The company guided for full-year 2025 adjusted EBITDA of $640-660 million, representing continued margin expansion. Upstart's guidance has been consistently conservative and frequently revised, making forward projections less reliable.

The macro environment does present headwinds for both. Consumer credit quality is deteriorating with delinquencies rising across categories, particularly affecting the near-prime and subprime segments where Upstart concentrates. SoFi's lending book skews toward higher-income borrowers, providing some insulation. Regulatory scrutiny of AI-driven lending decisions is also intensifying, which could impose compliance costs on both companies, though Upstart faces greater existential risk if regulators challenge its core underwriting methodology.

For long-term investors, SoFi represents the more compelling opportunity despite neither being a screaming buy at current levels. The company has demonstrated it can grow through multiple rate environments, achieve profitability, and expand beyond its lending origins. Upstart remains a turnaround story dependent on rate cuts and renewed lending appetite, with unproven durability through full credit cycles.