Financial expert and AI enthusiast Eric Jackson joins Michael Batnick and Downtown Josh Brown to discuss the market's strong start to November, using AI and machine learning to find alpha, fintech stocks, the court ruling impacting real estate stocks, the potential impact of AI on the financial industry, and the increasing market and demand for Nvidia chips in the AI field
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Quick takeaways
AI in the financial industry may lead to job cuts in certain areas but will not completely replace human analysts.
Adaptability and continual refinement of AI models are important due to the dynamic nature of markets.
Incorporating alternative data sources enhances investment analysis but constant monitoring is required to maintain alpha.
AI models can effectively utilize technical indicators and fundamental data to identify relationships and patterns in investment opportunities.
Deep dives
The Use of AI in the Financial Industry
AI is predicted to disrupt the financial industry, potentially leading to job cuts in certain areas such as trade settlement and operations. While AI can assist with analyzing data, it is unlikely to replace human analysts completely. AI models can provide suggestions, but the final decision-making and implementation are still done by humans. The use of AI in investment strategies is still in its early stages, with ongoing improvements and refinements expected in the future. Some areas where AI is being utilized include analyzing technical indicators, tracking app downloads, and monitoring Google trends to uncover potential investment opportunities.
AI and changing market dynamics
Markets are dynamic and constantly evolving, making it difficult to rely solely on AI models for investment decisions. The performance of AI models can vary depending on market conditions and fluctuations. It is important for investors to be adaptable and continually refine and improve their AI models to keep up with changing market dynamics. Traditional methods, such as fundamental analysis, can still play a role in investment decisions alongside AI-based models.
The potential impact of AI and alternative data
AI models can incorporate alternative data sources to enhance investment analysis. Stock-specific data, such as satellite imagery or social media trends, can provide additional insights and help identify patterns that may not be visible through traditional analyses. However, the value of alternative data can diminish over time as it becomes more widely used and incorporated into investment strategies. Constant monitoring and refinement of AI models are necessary to capitalize on emerging trends and identify new sources of alpha.
Combining technicals and fundamentals in AI models
AI models can effectively utilize technical indicators for investment analysis, but they can also incorporate fundamental data to enhance predictive capabilities. While traditional fundamental analysis has its merits, AI models can process and analyze vast amounts of data more efficiently, enabling investors to identify relationships and patterns that may not be easily apparent through manual assessments. Additionally, the best-performing AI models often incorporate non-technical variables, such as app store downloads or Google trends, to provide a holistic view of investment opportunities.
The Importance of a Balanced Skill Set
Having a diverse skill set, including knowledge of technical and fundamental analysis, can be valuable in finance AI projects.
The Potential of AI in Financial Industry
AI models have the potential to revolutionize the financial industry, leading to breakthroughs and significant returns for firms that successfully implement them.
The Future of Tech Companies
Tech companies like Nvidia and AMD are expected to experience growth through their AI applications and chips, with increasing demand for computing power and inferencing chips.
On episode 116 of The Compound and Friends, Michael Batnick and Downtown Josh Brown are joined by Eric Jackson to discuss: the market's strong start to November, using AI and machine learning to find alpha, the magnificent 7, fintech stocks, the court ruling impacting real estate stocks, and much more!
This episode is sponsored by US Benchmark Series. Learn more about the US Treasury 3 Month Bill ETF (TBIL) at: https://www.ustreasuryetf.com/
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