How AI Is Transforming Investing

Key points

  • The release of generative artificial Intelligence (“AI”) platforms like ChatGPT has driven increased attention around AI and the latest developments in natural language technology.
  • Similar to how these AI platforms use transformer technology to create large human-like text outputs, this technology can be used to help inform investment decisions.
  • Within BlackRock Systematic, we use transformers to maximize the accuracy and precision of natural language processing (“NLP”) across a wide range of data sources—uncovering potentially valuable investment insights.

Artificial Intelligence (“AI”), or the simulation of human intelligence by machines, has been evolving for decades. Generative AI is the latest breakthrough category in the space, garnering attention for its ability to create original ideas and content. Near the end of 2022, OpenAI released its AI platform, “ChatGPT” to the public. ChatGPT uses advanced language technology to create large human-like text outputs—bringing the most recent advancements in generative AI to the masses. ChatGPT exploded in popularity at the fastest pace of any online application, reaching one million users in just five days (Figure 1).

ChatGPT reached one million users faster than any other online application

So what is the technology underpinning this disruptive platform? ChatGPT is a large language model (“LLM”) based on generative pre-trained transformer (“GPT”) technology. LLMs are trained using massive amounts of data sourced from websites, books, academic publications, and other public datasets. These models are trained to predict the next word in a text given the previous context, and in that process, they acquire linguistic skills, world knowledge, as well as basic reasoning skills. Coincidentally, on the same day that Chat GPT was released to the public, BlackRock Systematic approved an investment insight that leverages the same transformer technology powering LLMs. Let’s explore how we use these models to enhance our investment capabilities.