Upstart (NASDAQ: UPST) and Lemonade (NYSE: LMND) seek to upend segments of the financial industry by using artificial intelligence (AI) to change how things get done. Upstart developed an AI-driven credit scoring system to improve how loans get approved, while Lemonade wants to disrupt the insurance industry through AI, using the technology to apply risk management to the sales process.

Although both AI stocks offer massive potential if they succeed, they both lost nearly all of their value in the 2022 tech bear market as the risks to their business models got more attention from risk-averse stock traders. In the current economic environment, one of these two stocks holds a better chance of succeeding, and the conditions of each business point to the reasons why.

Upstart seeks to upend the credit-scoring industry. More than 90% of lending institutions depend on Fair Isaac's FICO score to measure creditworthiness, and gaining approval for loans often hinges on having a high enough FICO score. However, this scoring system hasn't changed all that much since it became the standard in 1989.

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Source Fool.com