A popular investing strategy is to focus on businesses that have tremendous growth potential. The thinking behind this is that companies that can boost their sales at a fast clip over an extended period should produce stellar investment returns. 

One company that might fit this description is Upstart (UPST -4.35%). The tech-enabled lending platform has disruptive properties that investors are getting excited about partly because its addressable market opportunity is huge. 

But keep in mind that although Upstart could rise 10-fold in the next decade, it's a very high-risk investment. Let's take a closer look at this fintech stock, which is down 92% from its peak price. 

Upstart has incredible potential 

Using artificial intelligence (AI), a popular buzzword these days, Upstart's lending platform analyzes over 1,000 variables about potential borrowers to assess their credit-worthiness. Whereas the Fair Isaac FICO model looks at just five data points, Upstart believes it can better gauge a customer's risk profile. In fact, its website says that it can increase approval rates while keeping defaults under control. 

That means this technology is a winning solution for Upstart's 99 lending partners. Banking in general is incredibly competitive, as loans are essentially a commoditized product offering. But for those financial institutions that partner with Upstart and adopt this technology, it could mean more customers, higher revenue and interest income, and better growth prospects. 

As of March 31, Upstart originated $33 billion in loans throughout its entire history, of which 84% were fully automated. However, this is peanuts compared to the massive opportunity ahead. 

Upstart only powers personal and auto loans right now, which combined have a total addressable market of about $950 billion in the U.S. Therefore, the business is a tiny fish in a huge ocean. 

Management's plan is to get into new lending verticals, like the market for home loans and small business loans. Even small penetration in these markets can create a big upside for Upstart's business. 

The company, while dealing with some headwinds right now (more on this below), has proven that it can be very profitable when the demand for loans is strong. In 2021, Upstart's net income increased 2,164% to $135 million versus the previous year. 

Upstart's risks are significant 

There's no doubt that Upstart's investment merits are compelling, and the potential reward for shareholders is significant thanks to the stock trading at a super-cheap valuation right now. 

But investors need to be aware of the risks at play here. Macro headwinds, namely high interest rates which stunted demand from borrowers. And this carried into the latest quarter when Upstart's revenue declined 67%. And it posted a worrying net loss of $129 million. The enterprise is clearly very cyclical even though it markets itself as a tech business. 

Of those 99 lending partners that Upstart has, just two accounted for 48% of fee revenue. Having so much of the company's success reliant on a small number of partners exposes Upstart to concentration risk. What if one of these banks gets into trouble during a possible recession? Or what if one simply decides it doesn't want to use Upstart's platform anymore? That would be a devastating blow to the company's prospects. 

While Upstart's AI platform is innovative, I doubt the business will ever be able to sign a big bank, like JPMorgan Chase or Bank of America, as a partner. These massive financial institutions likely spend billions each year on their own tech capabilities. And we can't forget that they also command a large chunk of the loans that are originated. This can put a lid on Upstart's total market opportunity. 

As of this writing, Upstart's market cap is $2.5 billion. If it can find ways to grow substantially and at the same time mitigate those risks I discussed, then it's not crazy to think the business could be worth $25 billion by 2033. For what it's worth, the company's market cap did exceed $30 billion in late 2021.