In the rapidly evolving world of quantitative investing, a new player is making waves with its unconventional approach – letting artificial intelligence (AI) call the shots. Enter Intelligent Alpha, a $30 million fund that eschews human intuition in favor of the “wisdom” of machines.
An Investment Committee of AIs
While many asset managers now employ AI and machine learning to augment traditional research, Intelligent Alpha takes it to the extreme. The firm’s investment committee is comprised of a trio of AI: OpenAI’s ChatGPT, Google’s Gemini, and Anthropic’s Claude.
These virtual “partners” are given vast troves of financial data and tasked with building portfolios through the lens of legendary investors like Warren Buffett and Stanley Druckenmiller. Human intervention is kept to a minimum, with Intelligent Alpha CEO Doug Clinton opting to “stay out of the way” of the AI decision-makers.
AI’s Winning Track Record
So far, the AI method seems to be working. The models have made prescient calls, such as shorting Boeing before a 737 MAX malfunction and identifying chipmaker Nvidia as a top pick well before its metaverse-fueled surge. As Clinton notes, the AI is less swayed by emotion and better at “seeing forward” compared to its human counterparts.
Some of the AI’s best calls have been shorts. It was short on Boeing earlier this year, before that door blew off the 737 MAX.
– Doug Clinton, CEO of Intelligent Alpha
Betting Big on Bitcoin
While Intelligent Alpha has mostly focused on conventional assets thus far, it recently turned its AI lens to the world of crypto – with a bold prediction for bitcoin. In a scenario assuming a second term for crypto-friendly President Trump and a softening regulatory environment, the AI models see BTC potentially reaching $140,000.
It’s a lofty forecast considering bitcoin’s current price around $100,000, but one that will undoubtedly pique the interest of digital asset enthusiasts. The fund has begun allocating a portion of its capital to BTC in anticipation of this potential rally.
The Future of Machine-Driven Investing
Intelligent Alpha’s AI-first philosophy challenges traditional notions of investing and raises intriguing possibilities for the future of asset management. If the fund’s track record holds and its bitcoin prediction comes to pass, it could be a harbinger of a new era in quantitative strategies.
But the approach is not without risks and skeptics. Relying too heavily on AI “intuition” could lead to unforeseen blind spots, and the lack of explainability in machine learning models may give some investors pause. There are also challenges in adapting AI for the crypto markets, where sentiment and memes can trump fundamentals.
Nonetheless, Intelligent Alpha’s experiment is a fascinating case study in the evolving dance between artificial and human intelligence in the world of finance. If successful, it may pave the way for more AI-directed funds.
As for bitcoin, the jury is still out on whether the AI fund’s bullish call will prove prescient or overly optimistic. But one thing is certain – in the age of AI, “mechanical” investing has taken on a whole new meaning. The machines are rising, and the stakes have never been higher.
