The S&P 500 Financials Sector index has seen a 25% total return over the last year, outperforming the broader S&P 500 index. Despite this, there are still discounted stocks in the sector that show potential for strong returns, according to Motley Fool contributors.

Upstart (NASDAQ: UPST) recently posted strong second-quarter earnings, with earnings per share of $0.05 on sales of $257 million. The company’s AI lending platform showed momentum, leading to its first quarter of profitability in years despite an operating loss.

Despite management comments on inflation and competitive intensity causing sell-offs, Upstart’s guidance for sales to increase 66% annually suggests strong momentum. The company faces macroeconomic uncertainties but remains a promising long-term investment in the fintech sector.

Nu Holdings (NYSE: NU), a digital bank in Brazil, sold out of by Berkshire Hathaway, continues to show strong growth potential. With a significant market share in Brazil and opportunities for growth in Mexico and Colombia, Nu’s profitable and cost-efficient business model positions it as a high-growth stock.

Nu’s focus on artificial intelligence for credit models and cross-selling opportunities in its markets further enhances its growth potential. Despite economic volatility and the impact of the Buffett sale, Nu’s strong growth trajectory suggests a positive outlook for the stock in the long term.

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