In a broad sense, AI has been around the stock market for a long time. Initially, it took the form of arbitraging tiny differences between the bid-ask spreads set by different market makers in the same stocks. Competition in this area gradually became so hot that the physical distance between the arbitrageur’s computer and the market maker’s became a crucial element for success. Then there were autoregressions that attempted to predict near-future price movements. And there are now bots that analyze and react to company earning reports, conference calls and other announcements.
Financial news organizations are now reportedly part of an overall traditional media consortium negotiating with tech company creators of chatbots about payment in return for access to media written, audio and visual output to train the bots.
I think that this development has potentially important implications for you and me. Older efforts at computer driven trading were driven by efforts to act faster than humans on the freshest data. This has been lucrative for the firms doing this, I’m sure. But I personally don’t find it that interesting. And it’s a game most of us aren’t going to be able to compete in. It’s just another reason to take a longer time horizon than most–which is where the inefficiencies you and I can can exploit are most likely to be found.
Not so this latest development. As for AI use of media images, I don’t think there’s much stock market relevance, other than for companies like Adobe. Financial reporting, though, is another matter.
With the exceptions of the Nikkei News and its Financial Times subsidiary, I don’t think financial print reporting is very good at analyzing what companies are doing. Radio and TV personalities are, as far as I can see, mostly actors playing the role of financial experts, rather than the skilled financial minds they pretend to be. So I think there’s the potential for AI to come to–and act on–erroneous conclusions about stocks based on mistaken beliefs about the financial press. Resulting share price ups and downs may present the chance to buy or sell into AI-driven transactions.
It will be interesting to see how this all develops.