As investors consider what the growing interest in artificial intelligence means for the market, one analyst thinks ETF investors should be cautious about using it to help with strategy selection.
“ChatGPT knows a lot about a lot of things,” said Art Amador, co-founder of EquBot. Bob Pisani on CNBC’ETF Edge‘ on Wednesday. “But if you ask him to put together a portfolio or anything highly sophisticated or technical, it’s not possible.
Amador drives AI Powered Equity ETF (AIEQ)an actively managed fund of US stocks selected according to a model that uses artificial intelligence.
“We focused and applied AI specifically to understand critical signals in the market,” he continued. “Where ChatGPT is very broad in character.”
Amador acknowledged that both EquBot and ChatGPT approach strategies in a similar way. Both use a convolutional knowledge graph, he said, which combines structured and unstructured data and links relationships between different concepts, entities and events.
“We use these deep learning models to make predictions, and then those predictions are measured,” he said. “And then the information flows back into the powerful Knowledge Diagram, which is probably one of the most powerful tools in AI today.”
Since launching on Nov. 30, ChatGPT has amassed more than 100 million monthly active users, making it the fastest-growing consumer app in history, according to a UBS note released this month.
“I would say it’s kind of like the iPhone,” Bill Studebaker, president and chief information officer of ROBO Global, said Monday. “And I think as the field of artificial intelligence continues to evolve, we’re entering uncharted territory.”
Studebaker’s ROBO Global launched ROBO Global Robotics and Automation ETF (ROBO) in 2013 as a fund that invests in innovative companies in the field of robotics, automation and artificial intelligence.
“Fast forward 10 years later, we couldn’t be more condemned,” he continued. “And this wave of innovation is set to hit the business world and really redefine what’s possible.”
Studebaker explained that the most transformative companies will be those that are able to achieve real-time artificial intelligence powered by information and data.
“Real-time data is the most valuable of all,” he said. “If you have the ability to synthesize and understand data, you will be successful.”
AIEQ is an active fund that, according to Amador, rebalances almost daily. Among its largest holdings are Novavax (NVAX), Oracle (ORCL), Unity (UNTY), Year (YEAR) and Citigroup (C). He describes stock picking as more of a “bottom-up” approach.
“What we’re interested in are the critical signals for each of these individual companies,” he said.
Amador explained that EquBot takes these signals from a variety of data sources — news articles, social media posts, research reports and TV transcripts — and combines them with economic and market data to make price predictions about where stocks are going.
“And then the 140 names that have the highest appreciation potential or the highest expected returns end up in the portfolio,” he added.
Because AI can analyze more data in less time, using a stock-picking assistant can offer investors a competitive advantage over more traditional means. But Amador clarified that not all AI or all approaches to AI are the same.
“Our technical architecture, using things like knowledge, graphs and deep learning models, can be very different from how someone else approaches the problem,” he said. “You want to make sure you’re investing with people who have done it before, who have deep expertise and deep knowledge in this space.”