Think Twice Before Using ChatGPT for Stock Picks, Experts Warn
▼ Summary
– Approximately 13% of retail investors worldwide now use AI chatbots like ChatGPT for stock-picking advice, according to a survey of 11,000 investors.
– Investors use these AI tools as advisory aids by typing questions and manually executing trades based on the analysis, rather than for automated trading.
– A former UBS analyst cited cost savings as a key reason for using ChatGPT, as it replicates workflows that previously required expensive market-data services.
– A 38-stock portfolio selected by ChatGPT in March 2023 reportedly grew nearly 55%, outperforming the average of the UK’s top 10 funds.
– Experts caution that AI models can fabricate data and lack real-time market information, making them risky substitutes for professional financial advice.
The growing appeal of artificial intelligence chatbots has inevitably led many retail investors to experiment with them for stock market guidance. A recent global survey reveals that roughly one in ten individual investors now turns to tools like ChatGPT or Google’s Gemini when selecting stocks. Conducted by trading platform eToro among 11,000 participants, the study also found that close to half would contemplate using AI for future portfolio choices.
Rather than relying on high-frequency algorithmic systems, these investors typically use chatbots as a digital consultant. They pose specific questions, review the AI’s analysis, and then make their own manual trading decisions through brokerage accounts. This approach replaces traditional expert input with instant, accessible AI-generated insights.
Jeremy Leung, a former UBS investment analyst with nearly twenty years of experience, now depends on ChatGPT to manage his multi-asset investments. He explained that without access to costly professional terminals like Bloomberg, the AI tool effectively replicates many analytical tasks he once performed manually. For independent investors without institutional resources, such technology offers an affordable alternative.
In one notable example from March 2023, the financial comparison site Finder asked ChatGPT to pick stocks based on criteria including manageable debt and consistent growth. The resulting portfolio of 38 stocks has since reportedly gained nearly 55%, outperforming the UK’s ten most popular funds by almost 19 percentage points. While impressive, this outcome comes with significant context.
Market conditions have been exceptionally favorable, with U.S. equities hovering near all-time highs. The S&P 500 climbed 13% this year after a 23% surge in 2023, a bullish environment where many strategies appear successful. Analysts caution that strong market tailwinds can make almost any stock-picking method look effective, potentially masking the limitations of AI-generated advice.
This trend reflects a broader “democratization” of financial analysis, granting individual investors tools once exclusive to professionals. Still, experts emphasize that AI models carry inherent risks. They may invent or misinterpret financial data and typically lack real-time market updates. Relying on them entirely introduces dangers not present with licensed human advisors.
(Source: Ars Technica)
