Can AI Help You Beat the Stock Market? The Answer May Surprise You

Since 2017, AIEQ gained 100% while the S&P 500 returned nearly 200%, exposing AI stock-picking's persistent long-term underperformance.

AMOM beat the S&P 500 by 7 points YTD, but true AI stock-picking ETFs charge up to 25x more in fees than passive index funds.

Most ETFs labeled 'AI' simply invest in AI companies, and only a handful actually use artificial intelligence to select their holdings.

Artificial intelligence became a household investing topic after ChatGPT debuted in November 2022. But Wall Street had been teaching machines to analyze markets for decades. Quantitative funds have used statistical and mathematical computer models since the 1970s, while asset managers have increasingly turned to machine learning to process data humans cannot digest at comparable speed.

The investing thesis is straightforward: AI can give investors a powerful analytical advantage, but owning an AI-powered strategy does not automatically mean beating the market.

Retail investors quickly tried using ChatGPT and other large language models to pick stocks. The early results were often underwhelming. Hallucinations -- when an AI confidently produces incorrect information -- could turn an apparently sophisticated investment thesis into fiction.

Today's leading models are far better at reasoning, retrieving information, and reducing hallucinations, although none is error-free. That matters because professional investors have been applying more specialized forms of AI for years.

Amplify Investments launched the Amplify AI Powered Equity ETF ( NYSEARCA:AIEQ ) on Oct. 17, 2017, making it an early public test of machine-driven stock selection. Its strategy uses IBM 's ( NYSE:IBM ) Watson through EquBot to analyze financial statements, news, sentiment, macroeconomic information, and other data.

Then came fintech-native managers. Qraft Technologies launched Qraft AI-Enhanced U.S. Large Cap Momentum ETF ( NYSEARCA:AMOM ) and Qraft AI-Enhanced U.S. Large Cap ETF in May 2019, using machine learning to adjust factor exposure and select stocks. Following generative AI's explosion in 2022, institutional adoption accelerated as established asset managers began deploying proprietary deep-learning models for stock selection.

What Happens After A $1,000,000 Retirement?

How do you continue to grow a seven-figure portfolio in retirement? The last thing you want is to run out of money, you want your money to generate lasting income while you enjoy your life.