AI on the Rise: Chatbots as New Investment Advisors?

The world of investments is experiencing a digital upheaval as artificial intelligence, embodied by chatbots like ChatGPT, begins to establish itself as a serious force in financial advising. While traditional advisors continue to sell their services, around a tenth of private investors are already using chatbots for stock selection. Although enthusiasts praise the potential, experts warn of the risks of this strategy, which cannot completely replace the expertise of experienced advisors. The ability to conduct precise investment analysis is now available to non-professionals thanks to AI. Forecasts suggest that the market for automated, algorithm-based financial advising could experience remarkable growth by 2029, increasing from around 61 billion USD to almost 471 billion USD. A pioneer of this movement is Jeremy Leung, a former UBS analyst, who turned to ChatGPT to manage his multi-asset portfolio after losing his job. Although he lacks access to expensive market data platforms like Bloomberg, he believes ChatGPT can replicate much of his previous work—although it should be approached with caution due to the lack of access to paid data. Interest in AI platforms is exploding worldwide: according to a survey by eToro, with 30 million users, 50% of investors are considering the use of AI tools like ChatGPT or Google's Gemini for investment decisions. However, British users surveyed by Finder remain skeptical. ChatGPT itself warns users to be cautious and clarifies that its analyses should not be relied upon without further consideration. Recently, about 38 stocks selected by ChatGPT showed above-average performance, yet the tool lacks deep knowledge and risk awareness. Dan Moczulski from eToro advocates for specially trained models, as general AI models often present erroneous data. Jeremy Leung uses ChatGPT with specific questions to obtain the best possible answers. Nevertheless, the question remains whether private investors can successfully endure crises without mastering comprehensive risk management.