Can you use AI tools like ChatGPT to determine which ASX shares to buy?

Here's why I'd avoid using the chatbot to make investing decisions.

A man is shocked about the explosion happening out of his brain.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Aussie investors might be tempted to turn to AI software like ChatGPT to find ASX shares to buy
  • However, there are notable flaws in the technology's abilities that could impact those using it to make investing decisions
  • But that could all change in the future – some financial giants are developing their own AI offerings

If you've been on the internet in recent months, you've likely heard of ChatGPT – you might even be a user. Hundreds of millions of people have already employed the artificial intelligence (AI) chatbot to write essays, create artwork, or even to act as a companion.

But can AI technology help investors identify ASX shares to buy? Let's take a look.

The role of AI in the investing world

Using AI as a tool when looking to buy ASX shares is hardly new. Indeed, robo-advisors have been around for years, utilising AI or algorithms to offer investment advice or services.

Generally, automated advisors come at a significantly lower cost than traditional financial advice. Some even have decent track records of building wealth.

Of course, some of ChatGPT's features might be leaving such AI-driven advisors in the dust. However, as we review below, the chatbot's stock-picking abilities may not yet stand up to scrutiny.

Can ChatGPT be used to identify ASX shares worth buying?

As users have discovered, ChatGPT can find and process vast quantities of data, translating it into understandable, conversational text. In doing so, it can feasibly identify patterns and trends that could take humans hours or days to discern.

It's no wonder, then, that some investors have attempted to use the technology to find ASX shares worth buying. However, its use in the investing field appears to be limited. That's apparently because of the inevitable 'groupthink' built into the platform.

When putting the AI bot to the test earlier this month, The Motley Fool Australia's chief investment officer Scott Phillips found it could not discern companies with truly competitive advantages from those that simply boasted such qualities. Phillips wrote:

Because it uses public information, and everyone describes their company as having one [a competitive advantage], AI just tells us what it's found.

Such complaints are relatively tame when compared to other issues that could arise when using the software to find ASX shares to buy. Writing for ASX Ltd (ASX: ASX)'s blog last month, Australian Shareholders' Association CEO Rachel Waterhouse commented:

Without human intuition, judgement, and creativity, it is arguable that the platform will not be able to differentiate between information and misinformation, even if it is happy to tell you otherwise.

Not to mention, the information available to ChatGPT is currently limited to that existing as of September 2021.

To put that into context for ASX fans, in September 2021, Afterpay had yet to be acquired by Block Inc (ASX: SQ2), Allkem Ltd (ASX: AKE) was not yet born from the merger of Orocobre and Galaxy Resources, and Zip Co Ltd (ASX: ZIP) shares were still trading above $6.50 – more than 1,000% higher than an investor could buy them for today.

AI could be the future of stock picking

Having said that, it is possible that using AI to buy ASX shares might become the norm in the future.

Bloomberg, for one, is developing a large-scale generative AI model, to be called BloombergGPT. The technology is being developed specifically for use in the financial domain.

Not to mention, JPMorgan Chase appears to be developing its own ChatGPT-like software that could see ordinary investors using the technology for stock picking, CNBC reported last week.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Block, JPMorgan Chase, and Zip Co. The Motley Fool Australia has positions in and has recommended Block. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on How to invest

A young couple hug each other and smile at the camera standing in front of their brand new luxury car
How to invest

How to turn $100 a week into $500,000 with ASX shares

You don't need to invest large sums to become rich in the share market.

Read more »

Warren Buffett
How to invest

Warren Buffett's favourite holding period is forever, but there's a catch

Buffett is clear about what he wants.

Read more »

$100 Australian notes on top of each other.
How to invest

How to turn a $50,000 ASX share portfolio into a passive income machine

Here's how you could make the share market your own personal ATM.

Read more »

Different Australian dollar notes in the palm of two hands, symbolising dividends.
How to invest

How cash can make or break an investor's track record

Buffett has mastered the art of holding cash.

Read more »

Suncorp share price Businessman cheering and smiling on smartphone
How to invest

Why buy and hold investing with ASX shares could be your smartest move yet

Wealth building takes time but sure could be worth it.

Read more »

Happy young couple saving money in piggy bank.
How to invest

How to earn $12,000 of passive income from ASX shares each year

Want your own personal ATM? Here's how you can get paid by the share market.

Read more »

Happy young man and woman throwing dividend cash into air in front of orange background.
How to invest

The 2025 stock market selloff could be a once-in-a-decade opportunity to build wealth

Now could be a great time to grow your wealth in the share market.

Read more »

Business people discussing project on digital tablet.
How to invest

Is now a good time to start buying ASX shares?

Let's see if recent market volatility has created a buying opportunity.

Read more »