LONDON — As ChatGPT nears its third birthday, at least one in 10 retail investors is using a chatbot to pick stocks, fueling a boom in the robo-advisory market, but even fans say it is a high-risk strategy that cannot replace traditional advisors just yet.

Thanks to artificial intelligence (AI), anyone can select stocks, monitor them and obtain investment analysis that was once only available to big banks or institutional investors.

The robo-advisory market — which includes all companies providing automated, algorithm-driven financial advice such as fintech, banks and wealth managers — is forecast to grow to $470.91 billion in revenues in 2029 from $61.75 billion last year, marking a roughly 600% increase, according to data analysis firm Research and Markets.

NO ACCESS TO INFORMATION BEHIND A PAYWALL
Jeremy Leung, who spent almost two decades analyzing companies for UBS, has been using ChatGPT to chase stocks for his multi-asset portfolio since he lost his job at the Swiss bank earlier this year.

“I no longer have the luxury of a Bloomberg (terminal), or those kinds of market-data services which are very, very expensive,” Mr. Leung said.

“Even the simple ChatGPT tool can do a lot and replicate a lot of the workflows that I used to do,” he said, cautioning that such a tool might however miss some crucial analyses as it can’t access data behind a paywall.

Mr. Leung isn’t alone. The industry is growing fast and exponentially.

About half of retail investors say they would use AI tools such as ChatGPT, whose launch in November 2022 ignited the AI boom on the markets, or Google’s Gemini to pick or alter investments in their portfolio, and 13% of them already use these tools, according to a survey from broker eToro, which polled 11,000 retail investors across the world.

In the UK, 40% of the respondents to a survey by comparative company Finder said they have used chatbots and AI for personal finance advice.

ChatGPT itself warns it should not be relied on for professional financial advice and says its owner OpenAI has not released data on the number of people who use its chatbot to choose investments.

“AI models can be brilliant,” said Dan Moczulski, UK managing director at eToro, which boasts 30 million users worldwide. “The risk comes when people treat generic models like ChatGPT or Gemini as crystal balls.”

Mr. Moczulski said it is best to use AI-generated platforms specifically trained to analyze markets as “general AI models can misquote figures and dates, lean too hard on a pre-established narrative, and overly rely on past price action to attempt to predict the future.”

‘USE ONLY CREDIBLE SOURCES’
Finder asked ChatGPT in March 2023 to select a basket of stocks from high-quality businesses, with criteria such as levels of debt, sustained growth and assets that generate an advantage over competitors.

The selection of 38 stocks, which includes AI posterchild Nvidia and online retailer Amazon alongside consumer staples like Procter & Gamble and Walmart, has surged nearly 55% so far, almost 19 percentage points more than the average of the UK’s 10 most popular funds, including those managed by Vanguard, Fidelity, HSBC and Fundsmith.

Granted, US stocks are around record highs and right now, seem invulnerable to erratic US policies and patchy economic data. But stock picking using ChatGPT requires some financial knowledge and its adopters say there is a high risk of getting it wrong before getting it right.

Mr. Leung creates prompts like “assume you’re a short analyst, what is the short thesis for this stock?” or “use only credible sources, such as SEC filings.”

“The more context you provide, the better the responses,” he said.

The risks are big. The exuberance for the AI tool, which has democratized access to investment, means it is also impossible to tell if retail investors are using risk management tools to properly mitigate potential losses when the markets turn.

The pan-European STOXX 600 is up almost 10% this year, the S&P 500 has added 13% after surging 23% last year.

“If people get comfortable investing using AI and they’re making money, they may not be able to manage in a crisis or downturn,” Mr. Leung said. — Reuters

A FEDERAL JUDGE ruled on Wednesday that an effort by the Trump administration to force states to cooperate with immigration enforcement in order to receive billions of dollars in emergency and disaster aid is unlawful and unconstitutional.

US District Judge William Smith in Providence, Rhode Island, sided with 20 Democratic-led states and the District of Columbia, which challenged conditions the US Department of Homeland Security placed on their ability to obtain grant funding.

Those states sued in May, arguing the department was unlawfully using federal funding intended for emergency preparedness and disaster relief to coerce them into adhering to the Republican president’s hardline immigration agenda.

The department, which oversees US Immigration and Customs Enforcement and the Federal Emergency Management Agency, had argued that such conditions were justified because it was tasked with enforcing federal immigration law.

But Mr. Smith said the department’s policy was arbitrary and violated the US Constitution, as it imposed sweeping immigration conditions on all grants, regardless of their statutory purpose.

“Denying such funding if states refuse to comply with vague immigration requirements leaves them with no meaningful choice, particularly where state budgets are already committed,” he wrote.

New York Attorney General Letitia James, a Democrat, hailed the ruling in a social media post, saying it would ensure “the department can’t hold life-saving disaster relief funds hostage to advance its anti-immigration efforts.”

Tricia McLaughlin, a spokesperson for the department, in a statement said cities and states should not receive federal funding if they “break the law and prevent us from arresting criminal illegal aliens should not receive federal funding.”

The decision marked the latest victory for states contesting administration efforts to impose immigration-related conditions on grant funding. Another judge in Rhode Island in June blocked a similar move by the US Department of Transportation.

The Department of Homeland Security’s (DHS) conditions applied to all grants it administered. After the lawsuit was filed, the administration said it had decided to apply them only to a subset of the grant programs.

But Mr. Smith, an appointee of former Republican President George W. Bush, said DHS never formally rescinded the policy, meaning states would remain bound by conditions attached to every grant, including those it advised should be untouched.

He said that as a result states, “face a dilemma: either certify compliance with contested federal immigration policies or risk losing critical emergency and disaster-relief funding.” — Reuters

KUALA LUMPUR — Hong Kong, Sri Lanka, Chile and Bangladesh are seeking to join the China-backed Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade bloc, Southeast Asian officials said on Thursday.

The RCEP currently consists of China, Japan, South Korea, Australia, New Zealand and all ten members of the Association of Southeast Asian Nations.

RCEP officials, who are meeting on the sidelines of a gathering of ASEAN trade and economic ministers in Malaysia this week, said they had few objections to accepting new applicants and will work towards bringing the four economies into the bloc.

“We are of course in support of any countries that are willing to join the RCEP,” Indonesia’s Vice Minister of Trade Dyah Roro Esti Widya Putri told reporters in Kuala Lumpur.

Malaysia’s trade minister Tengku Zafrul Aziz said any decision on new RCEP members will be discussed when the bloc’s leaders meet for the first time in five years in October.

Tengku Zafrul has previously said the RCEP would seek to upgrade a trade deal it signed in 2020 during the October summit.

Some analysts have described the RCEP as a potential buffer against tariffs imposed by the United States, though its provisions are considered weaker than some other regional trade deals due to competing interests among its members. — Reuters