PGY vs. UPST: Which AI Credit Stock Is the Better Investment Option? |

The artificial intelligence (AI)-driven lending landscape has gained momentum as financial institutions increasingly turn to technology to improve credit underwriting, expand borrower access and manage risk. Pagaya Technologies Ltd. PGY and Upstart Holdings, Inc. UPST are two prominent players leveraging AI and alternative data to modernize lending.

While both aim to make credit decisions more efficient and expand access to financing, their models differ. Pagaya operates an AI-powered credit network connecting lenders with institutional capital, while Upstart runs an AI lending marketplace connecting borrowers with financial institutions, thus having greater direct exposure to loan origination and the performance of its lending marketplace.

Now, as AI becomes increasingly embedded in lending, the question arises: which among PGY and UPST can deliver stronger and more sustainable growth? In order to understand this, let us dig deep into their fundamental strengths and growth prospects.

The Case for PGY

Pagaya has built an adaptable, capital-efficient business model that has evolved beyond its initial focus on personal loans. The company has expanded into auto lending and point-of-sale (POS) financing, broadening its addressable market while reducing reliance on any single loan category. This diversification helps strengthen the platform’s resilience across different economic and credit cycles.

The company has also developed a diversified funding ecosystem, with more than 170 institutional partners and a growing reliance on forward flow agreements. Under these arrangements, investors commit to purchasing loans in advance, providing Pagaya with greater funding visibility and stability, particularly during periods of market volatility. Its funding strategy is further supported by strategic asset-backed securities (ABS) issuance.

Pagaya’s limited on-balance-sheet exposure is another key advantage. Loans are generally transferred quickly to ABS vehicles or institutional investors through forward flow arrangements, with capital secured ahead of origination. This structure helps limit credit and market risk, reduces the need for loan write-downs and allows the company to maintain flexibility even in challenging market conditions.

Technology remains another important differentiator. Pagaya’s proprietary platform, including its pre-screen solution, enables lenders to offer pre-approved credit opportunities to existing customers without requiring a formal application. This allows partner institutions to expand credit access and deepen customer relationships while potentially reducing customer-acquisition and marketing costs.

Improving operating leverage and cost discipline have increasingly supported Pagaya’s earnings growth of late. In the first half of 2026, total revenues rose to $705 million from $616.4 million a year earlier, while operating expenses increased modestly to $519.2 million from $512.2 million. This widening gap between revenue and expense growth highlights the scalability of its model. Building on this momentum, management expects 2026 GAAP net income of $155-$180 million and adjusted EBITDA of $460-$490 million, signaling confidence in continued growth without a proportionate increase in costs.

The Case for UPST

Upstart was among the pioneers in applying AI to consumer lending, using proprietary models to assess borrower risk beyond traditional credit scores. It generates revenues primarily through referral and transaction fees, servicing income, and gains from loan sales and securitizations. With more than 90% of loans fully automated, the platform is designed to make lending faster and more efficient for both borrowers and lending partners.

While personal loans remain the core engine of the business, Upstart is steadily expanding into adjacent categories, including auto lending, home equity and its newer Cash Line product. The company is also working to extend its AI underwriting capabilities into additional credit markets, creating opportunities to diversify revenues over time. The recent recovery in personal lending has strengthened the economics of the core platform, giving Upstart greater capacity to invest in newer products while maintaining its focus on profitability and operating leverage.

Funding remains another important strength of Upstart’s marketplace model. The company continues to broaden its institutional capital base and use forward-flow arrangements to provide greater visibility into loan funding. In July 2026, Upstart announced a multi-year agreement with Castlelake for up to $4 billion in consumer loans over as many as 24 months, reinforcing investor confidence in the platform’s underwriting and credit performance.

Recent performance also suggests that improvements in AI underwriting and loan demand are translating into stronger operating leverage. In the second quarter of 2026, revenues reached $365 million, while adjusted EBITDA increased to roughly $77 million. Management maintained its full-year outlook of $1.4 billion in revenues and $294 million in adjusted EBITDA, while retaining its longer-term target of 35% revenue CAGR from 2025 through 2028 and a 25% adjusted EBITDA margin by 2028.

Upstart’s potential national bank charter could provide another structural advantage over the longer term. In July, the OCC granted conditional approval for Upstart Bank, although FDIC and Federal Reserve approvals and other operational conditions remain outstanding. Once fully approved, the charter is expected to reduce certain lending complexities, support nationwide product availability and potentially lower the cost of credit, while existing banks, credit unions and institutional investors are expected to remain important funding partners.

PGY & UPST: Price Performance, Valuation & Other Comparisons

In the last six months, Pagaya’s price performance has been impressive, with its shares jumping 71.2%, outperforming the S&P 500 Index’s 13% growth. In the same period, the UPST stock has lost 3.5%. Hence, in terms of investor sentiment, PGY has the edge.