Matt Levine’s Money Stuff: ChatGPT Can’t Pick the Stocks

AI bots

I often write around here that there are two fundamental ways to use artificial intelligence to trade stocks:

1. You build a machine learning model for stock prices, you train it on historical data, and you use it to predict future stock prices. You buy the stocks that it says will go up.
2. You subscribe to ChatGPT. You prompt it, like, “You are a brilliant hedge fund portfolio manager. What stocks will go up?” You buy the stocks that it says will go up.

The first model is, approximately, a “quant hedge fund.” People have been doing some form of ...