Can AI Make You Rich in the Stock Market?

Karen Doyle

Artificial intelligence and machine learning are hot topics, and the applications for these exciting new technologies appear to be limitless. Investors want to know how to use this technology to help them make more money in the market.

Read: 3 Things You Must Do When Your Savings Reach $50,000

Here’s what you need to know about AI in the stock market.

Can AI Pick Winners in the Stock Market? 4 Things To Know

Studies, like one done at the University of Florida, have concluded that ChatGPT and other large language models can determine whether a news headline regarding a particular company is good, bad or irrelevant for the company and its stock price. This information can be used to predict whether a stock price will increase, decrease or remain flat.

While it sounds like exciting news for investors, a closer look is warranted. Here are four things to understand about ChatGPT and other AI tools.

1. The Data Set Is Limited

The current version of ChatGPT uses a data set that goes up to 2021, so current data is not included. This does not mean that bots cannot analyze current headlines — they can analyze anything that is provided to it. However, the analysis it performs is based on data that is no more recent than 2021.

2. AI Is Good for Analyzing Large Amounts of Data

Humans can also analyze headlines and classify them as hawkish, dovish or neutral, just like AI can. So, the advantage to using ChatGPT or another AI tool in this context lies in its ability to parse large amounts of data without getting tired or hungry. In investing, having access to large amounts of data that can be quickly analyzed can be a distinct advantage.

3. AI Takes Emotion Out of the Equation

AI has no emotion or conscience. When it comes to investing, this can be an advantage or a disadvantage, depending on your point of view. Removing all of the emotion from investing could provide more clarity on which stocks are likely to increase in value without considering whether the company treats its workers fairly, provides a quality product backed by appropriate customer service, or is a good corporate citizen.

AI removes the “vote with your wallet” aspect of investing, whereby investors can support companies they think are assets to the economy by investing.

In addition, by removing the human element of investing, decisions by AI, theoretically, would all be the same. If every investor used it, every investor would buy or sell based on AI’s recommendations. This could mean that stocks could have all buyers and no sellers, or vice versa.

4. Reliability Is Not Assured

The AI tools that are available today will answer questions using natural language, but there’s no guarantee that the answers will be correct. Due diligence before making any investment decision is as important as ever — maybe even more so.

3 AI Stocks To Invest In

One thing is for sure: AI has huge potential, in investing and in many other applications. While it may be early in the game to be using it to inform your investing choices, there are AI stocks that are worth a look. Here are some companies that are benefiting from the AI boom.

1. NVIDIA

High-end chip maker NVIDIA (NASDAQ: NVDA) recently reached $1 trillion in market capitalization. This puts it on the same level as other tech giants like Apple and Microsoft. The AI stock is up nearly 200% year to date, and some analysts think it has more running room in front of it.

2. Microsoft

Microsoft (NASDAQ: MSFT) is a big investor in ChatGPT, the technology that has become synonymous with artificial intelligence. The company behind ChatGPT, OpenAI, is privately held so you can’t invest in it directly. One way to ride the wave is to invest in AI stocks that are involved with it, like Microsoft.

3. Alphabet

Alphabet (NASDAQ: GOOGL), the parent company of Google, has developed its own AI product, called Bard. Building on its dominance in search, Google is betting that Bard will become the next generation of search. Those who currently use Google to find everything from nearby restaurants to answers to complex medical questions will naturally make the shift to the AI chatbot.

Final Take — Can AI Make You Rich?

Artificial intelligence may help you decide which stocks to consider adding to your portfolio, but it’s not yet to the point where investors should rely on it entirely. In the meantime, you can invest in the companies that are leading the way in this exciting technology.

FAQ

Here are the answers to some of the most frequently asked questions regarding AI stocks.

  • Are AI stocks a good buy?

    • Artificial intelligence stocks as a whole might be a safe long-term investment but before investing in a specific stock, make sure you research its performance outlook.

  • What is the number one artificial intelligence stock?

    • The number one pick for an artificial intelligence stock will vary from one person to another, depending on risk tolerance and financial goals. But here are three AI stocks to have on your radar:

      • NVIDIA (NASDAQ: NVDA)

      • Microsoft (NASDAQ: MSFT)

      • Alphabet (NASDAQ: GOOGL)

  • What is the price prediction for AI stocks?

    • AI stocks are a hot topic and the growth for them seems limitless. But with big growth, comes major risk. Make sure you research the stocks you are considering investing in and never invest more than you can afford to lose.

  • What is C3.ai?

    • C3.ai (NYSE: AI) is a software provider for large enterprises. It is a new company and is not quite profitable. This stock would be a good choice for investors who are not risk averse.

Information is accurate as of June 28, 2023. 

This article originally appeared on GOBankingRates.com: Can AI Make You Rich in the Stock Market?

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