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The Rise of AI: Will it really help us predict where to invest money?

Updated: Nov 5, 2023

Nvidia, leading provider of graphics processing units (GPUs) used in AI, made international headlines last week due to it reaching the $1 trillion club. With shares in the company increasing by more than 160% this year, it shows the AI investing trend is only on the way up from here. With the influx of AI tools entering the stock market and outperforming so many industries, it got me thinking - can we actually use AI to predict where to invest our money and better support those who are completely new to investing?

Where we are today

It's a widely known fact that the stock market can be highly complex, influenced by a variety of factors, including economic conditions, company earnings, and investor sentiment. As a result, for many beginners and more experienced investors, it is difficult to predict with certainty how the stock market will perform in the future. My earlier blog 'Why you don't need to understand the world's financial markets to start investing' looked at the resources out there which help simplify a lot of the investing process and make it more digestible. In the current era of Chat GPT, with the right prompts, anyone can learn a basic understanding on how to invest through AI. However, does artificial intelligence (AI) have the potential to help investors make more informed decisions about their investments by eventually providing insights into market trends and identifying undervalued or overvalued stocks?

How AI can be used to predict the stock market

There are a number of ways that AI can be used to predict the stock market. One way is to use its power to to analyze historical data and identify patterns that can be used to predict future price movements. Another way is to use natural language processing to analyze news articles and social media posts to identify sentiment about specific companies or industries. Experts anticipate it can also be used to develop trading algorithms that can automatically buy and sell stocks based on certain criteria.

Surely it can't predict every price movement?

While AI has the potential to help those investing make more informed decisions, there are a number of challenges that likely need to be addressed before it can actually be used reliably to predict the stock market. One fact as we've just highlighted is the stock market is a complex system influenced by a variety of factors, many of which are difficult to quantify. Another being that the stock market is constantly changing, so any AI model that is developed needs to be able to adapt to new information and changing market conditions.

'There must be someone who's inventing a simplified AI-powered stock market prediction app'

Without a doubt, there's an app on the way and a growing body of research already believes that AI has the potential to be a valuable tool for investors. As AI technology continues to develop, it is likely that AI-powered stock market prediction tools will become more accurate and reliable leading to a new era of investing where investors can make more informed decisions and potentially achieve better returns. Many predict that AI-powered stock market prediction tools will become increasingly affordable and accessible, helping investors develop more diversified portfolios and reducing their risk. Finally, if made right these tools could also help investors identify investment opportunities that would otherwise be overlooked. For me personally who is time poor, I'm banking on that one app that will save me hours of time by automating the process of analyzing financial data. Here's hoping!!

What's the next best thing at the moment?

Having researched what's currently out there, a few platforms do exist which I've listed below, although i'm yet to use (watch this space). Even reviewing their websites, I feel for many beginners they may be slightly too complex a tool. However, if you're feeling confident perhaps worth signing up to their free trials to explore.

  • QuantConnect: QuantConnect is a free online platform that allows users to create and backtest trading algorithms using historical data. QuantConnect also offers a number of AI-powered tools that can be used to predict stock prices.

  • AlphaSense: AlphaSense is a subscription-based platform that provides access to a variety of financial data, including news articles, analyst reports, and earnings transcripts. AlphaSense also offers a number of AI-powered tools that can be used to analyze this data and identify trends that could impact stock prices.

  • Hedgeye Risk Management: Hedgeye Risk Management is a subscription-based firm that provides a variety of research and analysis services to investors. Hedgeye's AI-powered tools can be used to predict stock prices, identify investment opportunities, and manage risk.

Rather than give any promises, hopefully this blog provides some optimism and hope that the future of AI-powered stock market prediction is very promising. If AI is helping us in every other area of our life, surely it has the potential to revolutionize the way we invest and help us make more informed decisions about our investments? Let's just hope we're only a few months away from a simple, affordable app for investing dummies!


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