ChatGPT’s Remarkable Performance in Stock Selection and Execution3-mins read

Sayan Chakraborty

Sayan Chakraborty |  Updated on 25/5/2023

In a stunning display of AI prowess, ChatGPT, the recent famous artificial intelligence-powered chatbot, has surpassed some of the most popular investment funds in the United Kingdom, solidifying its potential as a powerful tool for picking and executing stock purchases.

According to an experiment led by financial analysis site finder.com, a dummy portfolio of 38 stocks selected by ChatGPT gained an impressive 4.9% between March 6 and April 28. In stark contrast, 10 leading investment funds recorded an average loss of 0.8% over the same period. This remarkable feat has caught the attention of both investors and industry experts, sparking a new wave of enthusiasm for the capabilities of AI in the financial world.

Traditionally, investment funds rely on fund managers to make decisions on behalf of multiple investors. However, ChatGPT has democratised AI by placing this powerful technology in the hands of retail investors, providing them with potential guidance for their investment decisions. This shift has significant implications, as shown by a recent survey conducted by Finder, where 8% of UK adults had already sought financial advice from ChatGPT, and an additional 19% expressed their willingness to consider using it.

The Performance of ChatGPT in Stocks is Not a Mere Coincidence.

Researchers at the University of Florida performed a study and revealed that ChatGPT exhibited more accurate predictions of specific company stock price movements compared to some basic analysis models. Since OpenAI made ChatGPT accessible to the public, users have marveled at its ability to provide detailed and sophisticated responses to queries, opening doors to diverse applications ranging from educational support to healthcare guidance.

However, the rise of AI-driven tools like ChatGPT also raises valid concerns. Scepticism remains prevalent among investors, as 35% of respondents in Finder’s survey stated that they would not consider relying on a chatbot for financial decisions. Moreover, the potential for misinformation, cheating, and job displacement by AI looms as the technology continues to evolve.

Jon Ostler, CEO of Finder, emphasizes that individual investors should exercise caution and pursue their own research or consult qualified financial advisors, considering it premature to fully trust AI with their financial matters. Nevertheless, he acknowledges that the democratization of such radical technology has the potential to disrupt and revolutionize the financial industry.

ChatGPT Investing

Key Takeaway

The remarkable performance of ChatGPT in stock selection and execution sends ripples through the realm of finance, prompting fund managers to ponder the impact of this emerging technology on their traditional roles. While the integration of AI in investment decision-making has been present in major funds for some time, ChatGPT’s ability to empower retail investors introduces a new dynamic to the landscape, potentially shifting the balance of power.

As AI continues to evolve and find its footing in the financial world, it is crucial to strike a balance between harnessing its power and exercising caution. The future lies in embracing the potential of AI while remaining vigilant about its limitations and ethical implications. The democratisation of AI signals a transformative wave that could reshape industries, making it imperative for stakeholders to adapt and navigate this new frontier of technology-driven finance.

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