Beware the Market Risk of AI-Guided Investment

It's unclear if we can rely on AI tools to abide by the rules unless they're explicitly asked to. As they could influence investors, all AI companies must verifiably nip this risk in the bud

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As artificial intelligence (AI) expands its role in the financial world, regulators are confronted by the rise of new risks. It is a sign of a growing AI appetite among retail investors in India's stock market that the popular online trading platform Zerodha offers its users access to AI advice. It has deployed an open-source framework that can be used to obtain the counsel of Anthropic's Claude AI on how one could rejig one's stock portfolio, for example, to meet specified aims.

Once set up, this AI tool can scan and study the user's holdings before responding to 'prompts' on the basis of its analysis. Something as general as "How can I make my portfolio less risky?" will make it crunch risk metrics and spout suggestions far quicker than a human advisor would. One could even ask for specific stocks to buy that would maximize returns over a given time horizon. It may not be long before such tools gain sufficient popularity for them to play investment whisperers of the AI age.