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'ChatGPT, what stocks should I buy?' AI fuels boom in robo-advisory market
As ChatGPT nears its third birthday, at least one in 10 retail investors is using a chatbot to pick stocks, fuelling a boom in the robo-advisory market, but even fans say it is a high-risk strategy that cannot replace traditional advisors just yet.
Thanks to artificial intelligence, anyone can select stocks, monitor them and obtain investment analysis that was once only available to big banks or institutional investors. The robo-advisory market - which includes all companies providing automated, algorithm-driven financial advice such as fintech, banks and wealth managers - is forecast to grow to $470.91 billion in revenues in 2029 from $61.75 billion last year, marking a roughly 600% increase, according to data analysis firm Research and Markets.
NO ACCESS TO INFORMATION BEHIND A PAYWALL
Jeremy Leung, who spent almost two decades analysing companies for UBS, has been using ChatGPT to chase stocks for his multi-asset portfolio since he left the Swiss bank late last year.
Leung isn't alone. The industry is growing fast and exponentially.
About half of retail investors say they would use AI tools such as ChatGPT, whose launch in November 2022 ignited the AI boom on the markets, or Google's Gemini to pick or alter investments in their portfolio, and 13% of them already use these tools, according to a survey from broker eToro, which polled 11,000 retail investors across the world.
In the UK, 40% of the respondents to a survey by comparative company Finder said they have used chatbots and AI for personal finance advice.
ChatGPT itself warns it should not be relied on for professional financial advice and says its owner OpenAI has not released data on the number of people who use its chatbot to choose investments.
'USE ONLY CREDIBLE SOURCES'
Finder asked ChatGPT in March 2023 to select a basket of stocks from high-quality businesses, with criteria such as levels of debt, sustained growth and assets that generate an advantage over competitors.
The selection of 38 stocks, which includes AI posterchild Nvidia, opens new tab and online retailer Amazon, opens new tab alongside consumer staples like Procter & Gamble and Walmart, opens new tab, has surged nearly 55% so far, almost 19 percentage points more than the average of the UK's 10 most popular funds, including those managed by Vanguard, Fidelity, HSBC and Fundsmith.
Granted, U.S. stocks are around record highs and right now, seem invulnerable to erratic U.S. policies and patchy economic data. But stock picking using ChatGPT requires some financial knowledge and its adopters say there is a high risk of getting it wrong before getting it right.
Leung creates prompts like "assume you're a short analyst, what is the short thesis for this stock?" or "use only credible sources, such as SEC filings".
"The more context you provide, the better the responses," he said.
The risks are big. The exuberance for the AI tool, which has democratised access to investment, means it is also impossible to tell if retail investors are using risk management tools to properly mitigate potential losses when the markets turn.
This week’s fun find
You can't spell "enjoyable" without Joya. The newest member of the Relationship Management team hosted her first moai from her go-to lunch spot in the Path. She set expectations low when she described it as a "salad place". EdgePointers appreciated the super food power bowls with a side of mac & cheese. It’s all about balance.
For more than three decades, researchers have been attempting to create gears that are small enough to fit inside the human body, but with the current available tech, they’ve hit a wall at 0.1 millimeters in diameter. Now, however, a team at Sweden’s University of Gothenburg has built gears that are so tiny, they can fit inside a strand of hair, laying the groundwork for the smallest on-chip motors in history — and they’re powered by light.
