July 2024


AI in investment markets: A discussion among humans

Our Markets and Financing Research Retreat offers a wide range of academic expertise and timely market insights.

At our Research Retreat in London, a panel of experts discussed how artificial intelligence (AI) is impacting financial companies and its likely impact going forward.

The discussion was led by Neill Clark, head of State Street Associates EMEA, and included three panelists:

  • Aman Thind, Global Chief Architect, State Street
  • Marija Veitmane, head of Equity Research, State Street Global Markets
  • David Turkington, head of State Street Associates

As a theme, AI is top of mind for companies in every industry and it is likely to affect their growth and competitive position. Thind stressed that “over the next 20 years, the companies that survive will be the ones that adapt to use AI.” He noted that 52 percent of the companies in the Fortune 500 list in the year 2000 had ceased to exist by 2020, as technology disrupted established business models.

Veitmane agreed, adding: “AI was the most commonly mentioned term in Q1 earnings reports this year. They haven’t all figured out how to make money from AI, but they know everyone else is working on it, so they have to invest in it.”

She also pointed to its impact on the technology sector as an area of investment, saying it had “created earnings that are almost immune to market cycles.”

“Large cap tech stocks are outperforming smaller ones because they can invest,” she said. “The old narrative of fintechs stealing from big companies because they’re agile has been replaced by big companies being able to invest the capital needed, especially in computing power.”

Turkington noted that AI techniques are starting to move from hype to reality in the investing industry. “Just five years ago, very few quant analysts were using AI or machine learning, or investing in use cases for it, despite the fact they were all talking about it as a theme. But now it’s widespread and almost all of them are using it in some way,” he said, adding that interpretation of complex models is crucial, and there are promising techniques investors can use to understand the logic of machine outputs.

Thind cited some areas where State Street itself saw immediate or near term benefits from AI, and is currently investing in them. “Document intelligence – the ability to parse, process and analyze information and data from any type of document – is an important one, for example in private markets documentation,” he said.

“Also anomaly detection – AI is ‘garbage in/garbage out’ so, in terms of making sure your data quality is pristine, if you show AI how to find bad data, it will find bad data.”

In the multi-faceted and fast-evolving field of AI, we can expect significant progress in the months and years ahead, with the potential to fundamentally alter business models in the financial industry and the economy overall.

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