Even then, GPT-4 is already dated. There is no current system of feeding generative language AIs with new and dynamic information on the internet, such as stock price or interest rate fluctuations. So, if you’re thinking about taking a plunge into day-trading, this would not work well for you.
Who is turning to AI for investing advice?
However, for those looking at slightly broader movements, ChatGPT seems to serve admirably well, and younger Americans, many of them digital natives, have wholeheartedly embraced AI for investing advice.
According to The Motley Fool survey, 50% of Millennials and 53% of Gen Zers used the AI LLM to unearth stock picks. Meanwhile, only 25% of Baby Boomers — a cohort that still remembers how fax machines and floppy discs work — felt comfortable doing so.
Unsurprisingly, the survey also found that income levels can be good predictors of who tends to use the service for stock research. As many as 77% of high-income Americans say they have used ChatGPT for investment recommendations, compared to 43% of middle-income Americans and just 23% of low-income Americans.
Gender differences also turned out to be significant: women — who have outperformed men as investors recently — tend to be more conservative in money matters, according to The Motley Fool analyst Asit Sharma, being less impulsive and calmer during market volatility. So, it’s no surprise that only 41% of women used ChatGPT versus 55% of men.
In total, just over two-thirds (69%) of American adults said that they would consider using ChatGPT for investment advice in the future. This move to AI could be nothing short of a seismic upheaval in the economics of money management, thanks to the democratization of a tool that even someone like a hedge fund trader is simultaneously salivating over.
One recent survey of the top 50 hedge fund managers by London-based Market Makers found nine out of 10 hedge fund traders are planning to use AI to manage their portfolios for the rest of 2023.
What ChatGPT can do
Already, the news doesn’t look too rosy for the money men and women — such as institutional fund managers — who control and attempt to grow the vast assets of American savers.
For instance, a hypothetical fund of 38 stocks, chosen by ChatGPT and based on criteria (such as low debt, high growth) culled from the portfolios it was competing against, rose by 4.93% in the first eight weeks since its creation on March 6, 2023, versus an average of -0.78% posted by the 10 most popular funds in the UK. In fact, the hypothetical fund outperformed the top 10 on 34 of the 39 days the market was open.
Another potential nail in the coffin is a recent ChatGPT-based study conducted at the University of Florida, which suggests even more dire implications for fund managers worldwide.
In a paper published this week in the Social Science Research Network, professors Alejandro Lopez-Lira and Yuehua Tang described how they decided to test ChatGPT in how well it could conduct ‘Sentimental Analysis’ — essentially looking at headlines in articles to determine stock-picking strategy.
Again, ChatGPT is not trained beyond September 2021, so the researchers fed the AI model 67,586 headlines pertaining to 4,138 unique companies between then and now.
This kind of analysis has already been taking place in the trading rooms of hedge funds for some time now, but it was the first time that ChatGPT was tested to perform tasks almost identical to expensive proprietary trading platforms and with customized sentiment analysis built-in.
The ChatGPT trading model, using sentiment analysis, posted returns in excess of 500% during this period against the -12% from buying and holding an S&P 500 ETF during the same period.
If that isn’t bad news for the finance industry — and lower-rung research analysts, in particular, almost every day marks the emergence of new APIs and plug-ins that can integrate with ChatGPT.
For example, PortfolioPilot is a freshly released and verified ChatGPT plugin that allows portfolios to be dumped into it for analysis and recommendations — all for free.
Considering AI’s existing ability to best the most blue-chip of money managers out there, the days of paying mutual funds management fees for middling returns, at least in the current structure, may be winding to a close.
What ChatGPT can’t do
All of this sounds like investing nirvana, but before you plunge into the fray, buying and selling with your favorite investing bot, there are a few things you should keep in mind.
ChatGPT’s training ended in September 2021, so anything you ask it will not reflect the time period since. And that gap brings us to the tendency for generative AI to make up things when it doesn’t have answers to your questions — referred to as AI hallucinations.
Generative AI detects patterns really well, which it does by scraping data from pre-existing texts. However, it does not do well in causal reasoning and you could be lured into believing what it says through its glib conversational abilities. It’s also bad at math. Therefore, information or insights have to be double-checked for accuracy.
It also doesn’t read facial expressions well, which many investigative journalists and stock pickers rely on when watching CEO or CFO interviews to gauge the actual health of a company.
Finally, according to investment professionals, while it has amazed and delighted with its polished responses, many of these suggestions are still way too generalized to be helpful. It doesn’t ask the kind of sophisticated questions that any portfolio manager would.
Of course, AI can get better at all of these tasks in time, and each version that has come out has proven to be astonishingly better than its predecessor. But we’re not quite at investing nirvana yet.
And, when it gets there, we may have to negotiate a slightly larger headache — how do you make money in a market where information and analysis for any conceivable asset anywhere in the world is not at a premium, but just an AI prompt away?
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
