Note: This is the first of a series of articles we are publishing explaining how you can use artificial intelligence to make money, save time, or otherwise improve your life. If you’d like to see more of this, let us know!
I’ve been investing in stocks for 45 years and have made a few million dollars from it.
In this article, I’m going to explain how I recently used AI to pick stock ETFs, explaining how I approach stock picking and how I use AI to make it easier.
However, this is not an investment recommendation in any way, shape, or form.
Base
I believe in artificial intelligence. I’ve seen it evolve, use it extensively in the workplace and I believe it’s the beginning of a paradigm shift that will rival the Industrial Revolution or the Internet.
It’s going to be exciting, it’s going to be profitable, and most importantly, I want to make a profit from it.
I own stock in most of the major AI players, including Nvidia, Microsoft, Google, and Meta. These are the companies on the front lines of the AI revolution: the companies making the chips and hardware that make AI possible, and the companies that are buying the hardware and building the infrastructure to support all that computing power.
But AI business doesn’t end there. For example, last week I was thinking about investing in downstream companies: smaller companies that will be able to capitalize on AI to improve their products and services while cutting costs.
One area that shows a lot of promise? Health care, especially biotech. I’ve been reading that medical advances in biotech will accelerate when the power of AI is harnessed. I’m also reading that some of the larger pharmaceutical companies are going on a shopping spree by purchasing smaller biotech companies to improve their product pipelines.
So my thesis is: buy small biotech companies that will benefit from AI and maybe see the profits captured by larger health care companies.
But I spoke to ChatGPT to get a second opinion. Here is the exact exchange:
Me: : I’m thinking about investing in biotech stocks as a downstream AI play, because I’ve read that medical breakthroughs will accelerate when the power of AI is harnessed. Is this a good investment thesis?
chatgpt: : AI is clearly improving parts of drug discovery (target ID, protein design, assay design), and over a decade it should benefit some biotechs. But:
- Even with great tools, drug development is still slow, expensive, and highly prone to failure.
- The value created by AI may accrue more to a few “platform” winners and big pharma than to the average small biotech.
- Many “AI biotech” names are story-stocks with high valuations and very uncertain economics.
If you want to pursue this theme further, a more sensible implementation is usually: diversified exposure (ETFs or basket of established platform biotech/large caps) rather than concentrated stakes in small pre-revenue “AI + biotech” names.
Yes, ChatGPT, I realize that investing in small-cap biotech is high risk and requires diversification. That’s why, although I usually buy individual companies, in this case, I was thinking about exchange-traded funds or ETFs.
But which ETF?
I could have asked ChatGPT, but I thought I’d try talking to Microsoft Copilot instead. Here’s how it happened:
Me: : I am looking for ETFs for small and mid-cap biotech stocks. I am looking for companies that have potential for acquisition.
Copilot: The most suitable ETF for your goal – exposure to small- and mid-cap biotech firms with acquisition potential – is the ALPS Medical Breakthrough ETF (SBIO). It specifically targets companies in Phase II/III trials, which is a favorable location for acquisitions. Other strong candidates include the Virtus LifeSciences Biotech Clinical Trials ETF (BBC) and the SPDR S&P Biotech ETF (XBI), which offer broad exposure to the entire sector.
Copilot also gave me this additional information, as well as sources so I could read more about each ETF:
As you can see, the AI helped me find exactly what I was looking for: an exchange-traded fund that offers a diversified portfolio of small- and mid-cap biotech companies that offer lots of exposure as well as acquisition potential.
Did I listen to Copilot and buy the ALPS Medical Breakthrough ETF (SBIO) right away? no way. AI stock research is a place to start, not end.
However, after checking out these ETFs, including their annual returns and fees, I purchased 300 shares of SBIO at $46.33 per share. As I write this almost 3 days later, I’m up almost $650. But it’s still early; We will have to wait and see how it turns out over time.
What does it mean to you
The AI was extremely useful in helping me evaluate my investment thesis and find potential investments for it.
Since it is not always reliable, AI cannot be a complete solution. But it did the job for me in seconds, which would have taken hours a few years ago.
Better information + less time = easier, better investing
grassroots level? If you’re not using AI in your investing life, you’re missing out. From when to start claiming Social Security benefits to finding tax-advantaged investments, this is a great place to explore ideas, get questions answered, and additional information.
It’s probably the best tool I’ve ever used for money management, and I’ve been doing it for a very long time.