What happens when you ask the world’s hottest AI tool to create an ETF that can outperform the US equities market? It tells you what every frustrated stock manager tells you.
ChatGPT stated that the stock market was too difficult to predict and lacked access to real-time stock data. However, ETF Managers Group’s $102 million AI Powered Equity ETF (AIEQ) claims to have done precisely that this year.
AIEQ, which debuted in 2017, selects its portfolio assets using IBM’s Watson supercomputer. According to Morningstar data, it is up 13.5 percent year to date as of January 27.
Meanwhile, the Vanguard Total Stock Market ETF (VTI), a total market fund that serves as a benchmark, has gained 6.7 percent during the same time period, roughly half the return of the actively managed fund.
Each day, AIEQ evaluates over 6,000 publicly traded firms in the United States using a quantitative model that runs 24/7 on IBM Corp.’s Watson platform. It scrapes regulatory filings, news articles, management biographies, sentiment gauges, financial models, values, and other information. The product’s ownership and exposure levels can vary quickly, making it a barometer of sentiment for onlookers.
Recognizing ChatGPT’s limits, it’s vital to remember that the tool is language-based and wasn’t created to forecast industry trends. Furthermore, the startup behind ChatGPT, OpenAI, is open about its limits, such as its “limited knowledge” of anything after 2021.
Since the tool will not offer us a detailed new machine-made portfolio, the AIEQ is the next best thing.
However, AI’s smart guidance has a monetary cost. The AIEQ charges 0.75 percent for transactions. On the other hand, the VTI charges a flat fee of 0.03 percent on all transactions.
There is no race, though, since the AI era is only getting started, and there will likely be more options accessible in the future.