The Federal Reserve's aggressive course of interest rate hikes crushed major stock market indices in 2022, but things have been much more upbeat this year. No surprise here, but some stocks have performed exceptionally well -- including many harnessing the power of artificial intelligence (AI).

Look at AI-powered fintech Upstart Holdings (UPST 2.76%). At recent prices, its shares have doubled this year -- even after crashing 63% since the start of August. At Tuesday's close, a $1,000 investment in Upstart's stock at the start of 2023 would have been worth $2,023.

Let's look at the latest challenges facing this fintech stock, which will help provide better context to the company's long-term story.

Macro factors are impacting the business 

Upstart made its name using artificial intelligence to analyze a potential borrower's credit risk in greater detail than the traditional FICO scoring model -- a process that it claims provides a better picture of that borrower's actual default risk. The company's objective is to be able to provide wider access to credit, especially to viable borrowers who might otherwise be turned down.

So right off the bat, it's best to understand that Upstart's key business isn't necessarily funding loans itself, but allowing its 100 lending partners to use its technology to underwrite borrowers. This might seem like a favorable setup, which is why management doesn't hesitate to market the business as a tech-focused pioneer, as opposed to a financial institution. 

However, last year proved how cyclical Upstart really is. After years of monster growth, transaction volume and revenue declined 5% and 1%, respectively, in 2022. The blame points to higher interest rates across the economy, which reduces demand from borrowers and leads to more restrictive practices from banks. 

The effect is felt on the bottom line, too. Upstart generated positive net income of $135 million in 2021, only to post a net loss of $109 million in 2022. In the first six months of 2023, Upstart registered a notable net loss of $157 million (while revenue declined 56%).

Perhaps those disappointing metrics are the reason why the stock has cratered in the past couple of months or so. For the current quarter, revenue is again slated to drop by double digits. 

These trends highlight how much Upstart's success is tied to having a friendly macroeconomic backdrop. That's something entirely out of its control, a reality that investors can't ignore. 

What about the long-term picture? 

Despite the struggles that Upstart has been dealing with, which I'll admit are worrying as they prove how cyclical the business is, there are still reasons for investors to be optimistic about the company's potential. 

It's easy to get excited about the game-changing capabilities of AI in a multitude of industries. And the truly massive lending market -- some $4 trillion, including personal loans, auto loans, home loans, and small business loans -- seems to be a rich opportunity. In the latest quarter, an impressive 87% of loans on Upstart's platform were fully automated, requiring no human involvement whatsoever.

For what it's worth, Upstart's ability to increase accessibility to credit, while managing for risk, can be viewed as a net positive for society. It's something that can boost financial inclusion and economic empowerment while providing more people with the opportunities they deserve. If the company can get even remotely close to the growth it was posting prior to 2022, investors could stand to benefit.

All of this sounds promising, but I'm not so convinced just yet. Until Upstart can prove its worth in an economic downturn, with the ability to still grow revenue and post solid profitability, it's a speculative stock to own, in my view.