Yahoo Finance Buffett vs. ChatGPT: The Investment Face-Off — Who Truly Understands the Market?
When it comes to investing legends, Berkshire Hathaway’s chairman Warren Buffett is at the top of the list. At 93, the “Oracle of Omaha” is still one of the most famed investors, known for his motto that holding steady and being patient are key to successful investing. Buffett’s net worth currently stands at $135 billion, according to the Bloomberg Billionaires Index.
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Throughout the years, many investors have been following his investment advice — parsing not only his annual letter to shareholders, but also Berkshire’s regulatory filings, in search of clues as to where to invest next.
To put the above fact into context, in the first quarter, Berkshire reported operating earnings of $11.2 billion, compared to $8.07 billion for the same period a year earlier, according to Securities and Exchange Commission (SEC) filings. In addition, it’s worth noting that Berkshire has “delivered a 19.8% compounded annual gain in market value since 1965,” according to Bloomberg.
And as CFRA equity analyst Cathy Seifert wrote in a June 2024 note: “We see acquisitions and/or share buybacks remaining part of Berkshire’s capital allocation strategy, given the nearly $189 billion in cash and short-term investments on hand at March 31, 2024.”
Against that backdrop, it’s no wonder that some AI tools — such as the “ChatGPT Buffett Investment Tool” — are trying to mimic Buffett’s investment wisdom.
According to its description, the Buffett Investment Tool is “your personalized guide in the world of investing. Inspired by the wisdom of Warren Buffett.”
“This AI tool harnesses decades of investment strategies and philosophies, transforming financial acumen into actionable insights for the modern investor,” the description reads.
Yet, when it comes to financial wisdom — and financial success — some experts have varied views as to whether it’s better to use AI, Buffett’s guidance, or both.
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Buffett: No Questions Asked
Brenda Christensen, CEO of Stellar Public Relations, said that as someone who launched the world’s first robotic AI programming language, [Karel, for General Motors], she’d follow Buffett over ChatGPT.
“We’re just not there yet with AI investment advice, but I have heard wonderful things about BlackRock Aladdin. I have yet to try it,” she added.
Other experts echoed the above sentiment, saying that while ChatGPT may be able to incorporate everything that has ever been written about Buffett, as well as on stock market investments, it does not have the ability to replicate his thought process and knowledge.
“It may be able to recommend stocks that are currently in, or similar to, Berkshire Hathaway’s portfolio, but it is doubtful that its recommended investments today will outperform Buffett and Berkshire Hathaway in the future,” said Dr. David Kass, clinical professor of finance at University of Maryland’s Robert H. Smith School of Business.
“Was the ChatGPT ‘Buffett Investment Tool’ able to forecast and recommend Warren Buffett’s $6.7 billion investment in Chubb prior to Berkshire’s investment — which was accumulated during the third and fourth quarters of 2023 and revealed in Berkshire’s 13F filing on May 15, 2024?”
It Depends What Type of Investor You Are
Brian Prince, founder and CEO of TopAITools.com as well as co-founder and CMO of XCoins, outlined that Buffett takes a long-term view of the market — and that this is a good investment technique to follow for investors with low risk tolerance.
“He’s held Coca-Cola, one of his favorite stocks, for 35 years, and American Express for 30 years,” he said, noting that Buffett likes to invest in established brands.
Yet, according to Prince, when it comes to detecting market patterns, you can’t beat generative AI.
“After all, even though he’s a wise investor, Buffett could be prone to sentimentality, like any human being. He even talks about enjoying his Coca-Cola beverages that he also invests in,” added Prince.
Prince further argued that while studying Buffett’s techniques — and using ChatGPT with very specific prompts to tailor it to your specific financial situation — can be helpful, you should still rely on humans, particularly accredited financial advisors.
“Unless Buffett is your personal financial advisor, his advice is generalized for the mass market,” he said. “Likewise, ChatGPT may not be sophisticated enough to grasp the nuances of your financial situation the way a human might.”
For Now, Buffett Seems To Have the Upper Hand
Finally, some experts say that as AI is still in its nascent stages, you’ll be better off following the advice of a successful investor such as Buffett.
“His experience and his deep understanding of the nuances of investing simply cannot be replicated by an LLM [large language model],” said Renat Abyasov, CEO at Wonderslide. “When we eventually achieve AGI [artificial general intelligence], this will become a different discussion entirely. But as of now, Buffett GPTs can only try to mimic his investment strategies, rather than come up with original ones.”
Abyasov also noted that while you can combine the two — taking advantage of two different perspectives can often be beneficial — the current stage of LLMs simply cannot replicate the wisdom of someone like Warren Buffet.
“So, if they end up giving two completely opposite assessments of the same issue, I struggle to see how anyone would prioritize ChatGPT’s,” he added.
Brian D. Evans, CEO and founder of BDE Ventures, agreed with this premise, noting that AI is not sophisticated enough (at least at the moment) to provide the sort of cutting-edge investment advice that would give people an advantage.
“I don’t think AI is ready for this,” said Evans. “Relying on Warren Buffet would probably be a far safer and lucrative strategy than relying on ChatGPT and other LLMs, even if those tools are programmed to emulate Warren Buffett himself.”
Yet, Evans said he believes we are fast approaching a world in which AI will be capable of serving as a reliable financial advisor for the masses, whether serving retail or institutional investors.
“Indeed, I think AI is poised to automate so much in the investing world, and this is both really exciting and a tad alarming,” he said.
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