Shares of Upstart (UPST), the AI-powered lending platform, are feeling the heat. The stock has plunged about 54% from its 52-week high of $96.43. However, the pain isn’t over yet. UPST stock is down another 11% in morning trading Wednesday after it reported first-quarter financials on May 6.

Despite this recent slide, Upstart stock is still up about 83% over the past year. Much of that rally was driven by favorable macroeconomic tailwinds. Notably, three consecutive interest rate cuts by the Federal Reserve boosted lending platforms like Upstart, improving loan originations and conversion rates while reducing borrowing costs for consumers. The environment was ripe for growth, and Upstart capitalized on it.

Macroeconomic Headwinds Now Pose a Risk

But now, the tide seems to be turning. Growing macroeconomic concerns are starting to pose challenges. While the company reported no significant impact on its credit performance just yet, the increasing uncertainty around the economic outlook is hard to ignore, and it could impact UPST’s growth.

A key risk in the near term is the threat of reinflation, noted Upstart’s management during the Q1 conference call. If tariffs rise and prices climb amid a prolonged high interest rate environment, this could lead to weaker demand for credit and potentially more trouble for lenders like Upstart, whose models are sensitive to shifts in borrower behavior and macroeconomic conditions.

So, is the sharp pullback a chance to buy the dip, or a warning sign that Upstart’s rally has run out of steam? Let’s dive into what’s really going on with Upstart as market conditions remain uncertain and inflation concerns grow.

What’s Ahead for Upstart?

Despite the notable pullback in its stock price, Upstart’s long-term fundamentals remain solid. The company’s core personal loan product is growing rapidly, and its auto and home lending businesses are also gaining traction.

In the first quarter of 2025, Upstart delivered a solid revenue performance, reporting $213 million in total revenue, marking a 67% increase year-over-year. Of this, $185 million came from fees, a 34% jump from the previous year. This growing emphasis on fee-based income is particularly important, as it reduces the company’s exposure to credit risk while supporting more sustainable margins.

Upstart’s personal loan segment remains its primary growth engine. Loan originations surged 83% year over year in Q1, thanks to ongoing improvements in its AI underwriting models. Meanwhile, the company’s funding partnerships have diversified its capital sources, ensuring steady liquidity even in uncertain market environments. These enhancements have increased automation and higher approval efficiency, which drove conversion rates from 14% a year ago to 19% this quarter.

Originations in the auto lending business remained solid. Compared to a year ago, originations have grown nearly fivefold. This surge was primarily driven by better pricing strategies and continued refinements to its AI models. Importantly, Upstart also slashed customer acquisition costs for auto refinancing, thanks to cross-selling efforts and improved conversion rates.

In the home lending space, HELOC originations jumped 52% quarter-over-quarter and grew more than sixfold compared to the same period last year. Upstart has signed agreements with three lending partners and has begun transitioning these loans off its balance sheet, further optimizing its financial structure.

The Bottom Line on UPST Stock 

Upstart is growing at a solid pace, as reflected in the increasing number of loan originations flowing through its platform. At the same time, the company is shifting away from holding loans on its own balance sheet, instead leaning more heavily on fee-based revenue and adding stability to its operations.

Still, risks remain. The macroeconomic backdrop, marked by inflation and uncertainty, continues to cloud the outlook. While the stock’s recent pullback has made its valuation slightly more attractive, analysts remain cautious, maintaining a “Hold” rating.