With the S&P 500 trading at elevated valuations similar to the dot-com bubble peak, a market correction appears increasingly likely. The article recommends two AI-focused growth stocks—Cohu and Upstart—as potential buying opportunities if a downturn occurs. Cohu supplies semiconductor testing equipment critical to AI chip production, while Upstart uses AI to revolutionize loan underwriting with superior accuracy compared to traditional methods.

Upstart Holdings (UPST) has attracted significant investor attention despite a -5.7% monthly decline. The company shows strong earnings growth projections (+26.4% for current fiscal year, +47.3% for next year) and solid revenue growth (+36% and +30.9% respectively), with recent results beating consensus estimates. However, the stock carries a Zacks Rank #3 (Hold) rating due to premium valuation metrics relative to peers, suggesting near-term performance in line with the broader market.

Fintech is transforming financial services through AI, blockchain, and cloud computing integration. Robinhood Markets, Block, Inc., and Upstart Holdings are leveraging AI-powered tools to enhance customer engagement, automate operations, and expand financial accessibility. These companies are expected to benefit from growing adoption of generative AI, real-time payments, and tokenized assets, though regulatory scrutiny and cybersecurity threats remain challenges.

Upstart Holdings (UPST) declined 1.45% to $23.75, underperforming the S&P 500's 0.06% loss. The stock has fallen 5.82% over the past month, significantly outpacing the Finance sector's 2.69% decline. Upcoming earnings on November 3, 2026 are expected to show $0.6 EPS (15.38% YoY growth) and $364.63M revenue (31.58% YoY growth). The company holds a Zacks Rank #3 (Hold) with a Forward P/E of 10.95, slightly above its industry average of 10.93.

Upstart Holdings has partnered with Credit Union of Denver to expand access to affordable personal loans through its AI-powered digital lending marketplace. The partnership, which began in April 2026, allows qualified applicants to receive tailored loan offers and complete membership and closing online. Upstart continues to strengthen its credit union relationships, with Commonwealth Credit Union also expanding its partnership into HELOCs and indirect auto lending. The company reported strong Q2 2026 results with $4.2 billion in total originations (up 50% YoY) and $365 million in revenues (up 42% YoY).

Pagaya Technologies raised $3.7 billion across six asset-backed securities (ABS) transactions in Q2 2026 and added 11 new institutional investors, bringing the total to 174. The company is diversifying its funding model beyond traditional securitization through auto funding facilities, variable funding notes, and revolving personal-loan facilities. Despite expanding alternative funding sources, Pagaya completed a $600 million personal-loan securitization, bringing 2026 ABS issuance to over $9 billion, demonstrating that securitization remains a core funding engine.

Upstart Holdings (UPST) declined 2.01% to $23.86, underperforming the S&P 500's 0.58% gain. The company is anticipated to report Q earnings of $0.6 EPS (up 15.38% YoY) and revenue of $364.63 million (up 31.58% YoY). Full-year consensus estimates project $2.2 EPS and $1.42 billion revenue. However, UPST holds a Zacks Rank #4 (Sell) rating with a Forward P/E of 11.07, trading at a discount to its industry average.

Upstart (UPST) has declined over 70% from its July peak and reached a new 52-week low, driven by investor worry rather than poor fundamentals. Despite the stock weakness, the company shows strong operational performance with Q2 revenue up 42% year-over-year and full-year guidance 40% above 2025 results. Analysts maintain a consensus price target of $39.24, suggesting 70% upside potential once market sentiment improves.

Pagaya Technologies (PGY) trades at a discounted 0.89X forward P/S ratio compared to industry average of 2.59X, supported by strong funding diversification ($3.7B raised in Q2 2026), multi-product expansion, and improving operating leverage with 1H26 revenues at $705M. However, the stock carries a Hold rating due to margin pressures from funding costs and flat earnings estimate revisions, warranting caution before building new positions.

Upstart Holdings (UPST) has attracted investor attention despite a -15.5% decline over the past month. While the company shows strong revenue growth (+36% expected for current fiscal year) and earnings growth (+26.4% for current year), it received a Zacks Rank #4 (Sell) rating due to unchanged earnings estimate revisions. The stock is trading at a premium valuation (Grade D) compared to peers, suggesting potential underperformance in the near term.

SoFi obtained a federal bank charter in January 2022, allowing it to take deposits and fund loans internally, which has driven significant growth in deposits ($1.2B to $45.5B) and membership (3.9M to 15.8M members). Upstart received conditional approval for a bank charter in July 2026 with final approval expected in early 2027, while Affirm applied for an industrial loan bank charter in January 2026 but has not yet received approval. Bank charters are transformative for fintechs as they eliminate third-party funding fees and allow them to offer more competitive rates.

Affirm Holdings has launched a new transformer-based machine learning model for real-time credit underwriting at U.S. checkouts. The model approved more applications and generated 3.4% more completed purchases in testing by analyzing transaction and repayment patterns. The technology leverages 14 years of proprietary data to broaden customer access while managing credit risk, potentially supporting higher transaction volumes and revenues.