If there’s one thing that can be learned from literally hundreds of ChatGPT-related posts out there claiming that the AI chatbot has successfully beaten the market, it’s that ChatGPT’s responses show huge variance based on the input it receives and one should learn to enjoy and benefit from the diversity of possibilities offered by AI. In January this year, people at Bloomberg asked ChatGPT to make an ETF to beat the US stock market. ChatGPT gave nothing in return but the age-old cliché statement to the effect of “past performance doesn’t guarantee future returns” and that it’s not possible to beat the market for it due to massive volatility.
But many experts were able to force ChatGPT to blurt out a list of stocks by asking it to act as an expert stock adviser. To check out some stocks recommended by ChatGPT, see our article published back in March where we asked ChatGPT to pick stocks that have the potential to make investors rich.
Investors have been toying with the idea of using AI to beat the market for quite some time now. Back in 2021, when Sam Altman’s OpenAI was perhaps getting ready to unleash the market-moving, earth-shattering thing that is ChatGPT, Bloomberg had reported that researchers at the University of Oxford claimed they have come up with a machine learning model with a capability to predict stock price movements. They claimed that the model posted a whopping 80% success rate for the equivalent of about 30 seconds of live trading.
The Bloomberg report at the time said that the researchers, who were backed by the UK-based Man Group, used natural-language processing algorithms to process trading data. The report said that the algorithm managed to predict the future trajectory of a price over a period of 100 ticks.
The Buzzword Game
We’ll take a detailed look at whether or not AI is good at stock picking but one thing is for sure: AI has a huge impact on the stock markets, so much so that many investors are comparing the AI-driven stock market gains to the ones seen in the crypto markets and during the dot-com era. Just look at what’s happening at companies’ earnings calls. Companies are repeatedly using buzzwords like “generative AI”, “large language models”, “artificial intelligence”, etc. during their earnings call and shareholder meetings. Bloomberg in a report quoted interesting data points which show that the use of the word “artificial intelligence” jumped a whopping 85% during earnings calls. There’s a reason why everyone is talking about AI. Whenever a company announces plans to somehow deploy AI in its operations, its stock price jumps. Even non-tech companies like Wendy’s enjoyed stock price gains when they announced plans to cut costs using AI.
What's Happening with NVIDIA Corporation (NASDAQ:NVDA)?
But what’s happening with NVIDIA Corporation (NASDAQ:NVDA) is strange and highly unprecedented. NVIDIA Corporation (NASDAQ:NVDA) shares skyrocketed by 25% on May 25 after the company posted solid quarterly results and gave a revenue guidance of $11 billion for the second quarter, shocking Wall Street analysts who have a $7.2 billion estimate for the metric. NVIDIA Corporation (NASDAQ:NVDA)’s guided revenue is up 64% from the year-ago period, and comes on the huge demand fueled by the widespread use of applications like ChatGPT.
"In 22 years of covering tech stocks and large cap we have never seen a guidance range of this magnitude on a large cap tech name…And thus speaks to our thesis that the monetization of AI for stalwarts like Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc. (NASDAQ:GOOG), Amazon.com Inc. (NASDAQ:AMZN), Oracle Corporation (NASDAQ:ORCL), Meta Platforms, Inc. (NASDAQ:META), Apple Inc. (NASDAQ:AAPL), and salesforce.com, inc. (NYSE:CRM) is well underway."
NVIDIA Corporation (NASDAQ:NVDA)’s management during the company’s Q4 earnings call was already pointing to the huge potential coming from the generative AI space. Here’s what the company’s CEO Jensen Huang had said:
"The cumulation of technology breakthroughs has brought AI to an inflection point. Generative AI’s versatility and capability has triggered a sense of urgency at enterprises around the world to develop and deploy AI strategies. Yet, the AI supercomputer infrastructure, model algorithms, data processing and training techniques remain an insurmountable obstacle for most. Today, I want to share with you the next level of our business model to help put AI within reach of every enterprise customer. We are partnering with major service — cloud service providers to offer NVIDIA Corporation (NASDAQ:NVDA) AI cloud services, offered directly by NVIDIA and through our network of go-to-market partners, and hosted within the world’s largest clouds.
Comparison website Finder.com asked ChatGPT to create a portfolio of stocks to beat some of the most popular funds in the UK, including Fundsmith, Vanguard LifeStrategy 100% Equity A Acc, Vanguard LifeStrategy 80% Equity A Acc, Vanguard FTSE Glb All Cp Idx £ Acc, among others. ChatGPT came up with a comprehensive portfolio. This portfolio contains 38 stocks. According to Finder, the portfolio gained about 4.09% in the first 11 weeks since it was created by Finder on March 6, 2023, and outperformed 10 most popular funds in the UK, which were down 0.12% over the same period. For this article, we selected 12 stocks from this ChatGPT’s portfolio with the highest number of hedge fund investors.
3M Company (NYSE:MMM) ranks 12th in our list of the top stocks in ChatGPT portfolio. With over six decades of consistent dividend increases, 3M Company (NYSE:MMM) is one of the top choices of defensive investors.
In April 3M Company (NYSE:MMM) posted strong first-quarter results. Adjusted EPS in the period came in at $1.97 beating estimates by $0.37. Revenue in the quarter totaled $7.7 billion, surpassing estimates by $190 million.
As of the end of the first quarter of 2023, 51 hedge funds had stakes in 3M Company (NYSE:MMM). The most significant stakeholder of 3M Company (NYSE:MMM) during this period was Cliff Asness’s AQR Capital Management which owns a $210 million stake in the company.
Perhaps ChatGPT is well aware of the importance of investing in defensive, dividend-paying stocks in volatile times like the one we are living in these days. The Coca-Cola Company (NYSE:KO) has over six decades of consistent dividend increases under its belt. Wall Street analysts are labeling The Coca-Cola Company (NYSE:KO) as one of the best stocks to own during these troubled times. As of the end of the first quarter of 2023, 61 hedge funds were long The Coca-Cola Company (NYSE:KO). The biggest hedge fund stakeholder of The Coca-Cola Company (NYSE:KO) is Warren Buffett’s Berkshire Hathaway which owns a $25 billion stake in the company.
Home improvement equipment retailer The Home Depot, Inc. (NYSE:HD) is one of the top stock picks of ChatGPT. Earlier this year UBS published a list of top dividend stocks picked up by its machine learning model. The Home Depot, Inc. (NYSE:HD) was a part of the list.
Out of the 943 hedge funds tracked by Insider Monkey, 65 hedge funds reported owning stakes in The Home Depot, Inc. (NYSE:HD) as of the end of the first quarter of 2023.
The Procter & Gamble Company (NYSE:PG) is one of the top ChatGPT stock picks. With a solid dividend growth history, The Procter & Gamble Company (NYSE:PG) has a diversified revenue stream which makes the company a strong defensive play. In April, Morgan Stanley Dara Mohsenian reiterated an Overweight rating on The Procter & Gamble Company (NYSE:PG).
ChatGPT surely loves dividend stocks and defensive plays. In addition to a stable dividend which has seen consistent increases for six decades, Johnson & Johnson (NYSE:JNJ) also has long-term growth catalysts. Johnson & Johnson (NYSE:JNJ)’s Janssen unit recently announced that 72.7% of patients treated with its investigational bladder cancer therapy TAR-200 indicated no detectable evidence of cancer in a mid-stage trial.
Hedge funds were also piling into Johnson & Johnson (NYSE:JNJ). A total of 86 hedge funds had stakes in Johnson & Johnson (NYSE:JNJ) according to Insider Monkey’s database of hedge funds.
Medical instruments and commercial products maker Danaher Corporation (NYSE:DHR) ranks 7th in our list of the top ChatGPT stock picks. In April Danaher Corporation (NYSE:DHR) posted strong first quarter results. EPS in the period came in at $2.36, beating estimates by $0.10. Revenue in the quarter fell 6.4% year over year to $7.2 billion, still beating estimates by $140 million.
Legendary billionaire Warren Buffett’s conglomerate Berkshire Hathaway Inc. (NYSE:BRK-B) was one of the top picks of ChatGPT. Berkshire Hathaway Inc. (NYSE:BRK-B) is up about 4.5% year to date through May 13. Berkshire Hathaway Inc. (NYSE:BRK-B)’s operating earnings in the first quarter of 2023 gained 13% year over year, driven by insurance underwriting and investment income.
