2023 Is the Year of AI

Editor's note: The markets and our offices are closed Monday, January 16, for Martin Luther King Jr. Day. Because of this, we won't publish Altimetry Daily Authority. Please look for your next edition on Tuesday, January 17.

Artificial intelligence ('AI') has the potential to change the very fabric of society...

During my holiday break, I dove headfirst into the deep end of the AI pool.

Now, AI itself is nothing new. Businesses – mostly tech companies – have been trying to develop and use it for years. It's so common in the tech world that it has become a corporate "buzzword."

AI is already visible in many areas, such as the development of self-driving cars. Electric-vehicle maker Tesla (TSLA) has made headlines for testing its self-driving software, which is powered by AI.

Personally, I'm not ready to trust the self-driving feature all on its own. However, the technology has the potential to significantly reduce accidents and fatalities on the road.

This AI coupled with a human driver is an amazing tool. Two heads are better than one, so to speak.

And that's my point... For business and personal utility, and especially for investing, we can accomplish wonders if we embrace AI.

It's important to remember that these AI tools aren't perfect...

You might have heard of ChatGPT. This AI chatbot has taken the world by storm. It launched publicly on November 30, 2022... and it's already valued at $29 billion.

It surpassed 1 million users in less than five days. Five days.

The tool uses natural language processing to understand and respond to inquiries in real time. It's like a souped-up version of Google, only you can interact with it continuously in normal conversation.

ChatGPT has its limitations. For one thing, it only uses data through 2021. Still, you can think of it like an AI personal assistant.

I used ChatGPT to transcribe one of my own talks on valuation and asked it to write an article summarizing the talk. While the draft wasn't suitable for publication, it was nothing short of amazing. The speed with which ChatGPT provided a fantastic starting point saved me a ton of work.

The tool has clear potential for investors, too...

Of course, it's not going to tell you what stocks to buy. It can process data a lot faster than you, though.

So if you want to study industry trends... or if you need help understanding a company's business model... tools like ChatGPT could be helpful.

Similar to ChatGPT, Jasper and Tome are also powerful AI tools that can help folks and businesses work faster. They each have their own unique capabilities.

Jasper.ai lets you make images and graphics using just a few words as a prompt. It's much faster than building a chart in Microsoft Excel or searching for a stock image on the Internet. Tome can build slide decks based on simple prompts.

Some folks may see the emergence of these types of AI as a threat to their roles. They view it as the start of a wave of automation that could leave people without jobs.

I disagree. Think how fast even our youngest analysts could produce great content with these tools behind them.

AI supercharges the work of the individual using it. It doesn't replace that person.

Sure, more menial mental tasks will be automated. These tools can perform those tasks much faster than humans can. That means we'll be able to spend much more time on creative enterprises. And productivity will accelerate.

I've tested many types of content creation... from articles to images to presentations. None of the output was ready to publish as is.

It's the way it speeds up the process that's so incredible.

Importantly, AI's uses extend to investment research...

We've been hearing rumblings about how AI can help analyze and summarize large amounts of financial data.

The best of the best quantitative funds are way ahead of the rest of the world in embracing AI. Renaissance Technologies is one such example...

Under founder Jim Simons, Renaissance was a pioneer in the use of machine learning to analyze the markets. He's known for preferring employees with experience in science and math over Wall Street pros.

The fund's results show how powerful this can be. Renaissance's flagship Medallion fund has returned 66% annualized since inception. And in 2021, Simons made $3.4 billion... more money than any other hedge-fund manager.

I don't view AI as a threat to the investing world, or to my team's research process or people.

Rather, this is the year to wholly embrace these tools and push them to fulfill our needs...

It's a chance to see where AI can make our businesses – and our lives – stronger and more efficient.

Most of the tools I've mentioned are free or cheap to use. The next time you're sitting down to research an investment idea or theme, I urge you to add some of these AI tools to your arsenal.

If you were planning on Googling a particular investment question, try putting your query into ChatGPT instead. The key is to phrase it as a much longer and more descriptive question... as if you were asking a human assistant.

Here's an example I came up with...

Let's say you were trying to figure out what distortions from generally accepted accounting principles ("GAAP") apply to ExxonMobil's (XOM) as-reported metrics.

You might Google something like "ExxonMobil accounting distortions." Your results will be links that may take you to partial answers.

ChatGPT is more flexible, though. I asked ChatGPT the following... "Imagine you are the CEO of ExxonMobil. Provide 20 specific examples of how GAAP accounting does not accurately reflect the corporate performance of your business."

The chatbot was able to provide several of the same distortions that the Altimetry team corrects for using Uniform Accounting.

I'd love to see what you come up with. Please feel free to send me an e-mail at [email protected] with your findings.

There's practically no limit to the ways you can implement AI in your investing. As this technology becomes more widespread, investors who embrace it can gain a leg up on their peers.

Wishing you love, joy, and peace,

Joel
January 13, 2023