We were intrigued by the hype around ChatGPT and its sophisticated artificial intelligence, so we decided to put it to the test: could it be used to analyze a stock? 

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To see what it could do, we started by asking it “Should I invest in Tesla?”. 

The response I got was pretty generic, but with a bit of trial and error I figured out how to ask it the right questions – and when I did, it produced some incredibly insightful results. Here are six clever ways to utilize ChatGPT to analyze a stock.

Understand High-Level Things About a Company with ChatGPT

Investing in a company’s stock is essentially putting your money into the business itself. Therefore, it is essential to have a thorough understanding of the company before making any purchases. 

To gain this knowledge, you can read annual reports, investor presentations, and other documents. 

Alternatively, you could use ChatGPT to quickly get an overview of the company. For example, when we asked it to “describe Tesla’s business model to me”, this was the response you may get:

This is a great overview, highlighting both what Tesla (TSLA) has to offer and why it matters. But let’s take it a step further and use ChatGPT to determine Tesla’s economic moat – i.e. their ability to stay ahead of their competition, hold onto their market share, and ensure long-term profitability. 

The legendary investor Warren Buffett always looks into a company’s moat before making an investment – so I posed the question to ChatGPT: “What are Tesla’s economic moats?”. Here’s the answer I got:

Once more, not a bad summary. You can even push the boundaries by asking detailed questions to gain further insight into a company. 

As an example, we asked “How easily can Tesla scale up?”, and the response I received was thought-provoking.

What About Using Chat GPT for SWOT Analysis?

Doing a SWOT analysis of a firm can be a tedious yet fruitful process. We wanted to find out what the SWOT analysis of Tesla was so we consulted ChatGPT. 

The outcome was incredibly impressive, despite its simplicity! Here’s what it had to say:

Chat GPT and Earnings Calls Summary

Earnings calls are an essential source of intel for investors. On these hour-long calls, each quarter, the company’s executives provide a rundown of the company’s latest results, give their view of the business and industry, answer questions from analysts, and more. 

But it can take forever to listen to all the calls of the stocks you’re interested in. So why not let ChatGPT do the work for you?

Here’s how it works:

Using Google, we found the transcript of the specific Tesla Q4 2022 earnings call that I wanted, with the management team’s remarks and the Q&A session with analysts. 

Then, we put the link’s URL into ChatGPT and asked it to give me the 15 most crucial points, as opposed to the standard five points. 

Here is what it conjured:

ChatGPT was definitely an advantageous tool in my book, however I did spot a few drawbacks. To begin with, not all earnings call transcripts can be found online for free. 

Plus, by actually tuning in to the earnings call you can hear the manager’s attitude and get an insight of their emotions which is something that cannot be included in the transcripts. 

Finally, there is a risk of missing out on some essential information while summarizing.

ESG Credentials Evaluation with Chat GPT

Not just about returns, investing can be an opportunity to contribute to a better world. One successful strategy is ESG (Environmental, Social, and Governance) investing, which has been shown to generate higher returns than traditional investments in the long run. 

ChatGPT allows you to easily see if a firm meets ESG standards and assess its potential success. 

We posed the challenge of evaluating Tesla’s ESG credentials to AI, and the response was quite impressive!

Test Forex and CFD Signal Providers with Gchat GPT

Are you a coder looking for a more sophisticated approach to ChatGPT? If you’re interested in buying a stock based on some technical analysis indicator such as the relative strength index (RSI), this could be a great option. 

The RSI assigns a value between 0 and 100 to an asset, so a value below 30 indicates the stock is “oversold” and could be a great time to buy. Get more information on the RSI here.

Trying to figure out if buying a particular stock when its RSI dips below 30 has been historically profitable but can be a tricky query to answer – and it requires a complicated coding process that takes technical knowledge to understand. 

That’s where ChatGPT comes in! Just ask it to write you code to evaluate the performance of Tesla’s stock one month after its RSI dips below 30, and it will do the work for you! Here’s an example of what it can do:

The end result was incredibly impressive: my code not only downloaded Tesla’s historical stock data from YFinance, but also calculated the RSI, detected times when the RSI dropped below 30, and worked out the 1-month returns after a buy signal was given. 

To top it all off, it even plotted the cumulative returns for this strategy. A note of caution though – this is merely a demonstration of a simple strategy and should not be used for real investment decisions. 

Pretty impressive stuff!

Try testing out this one example of technical analysis – asking ChatGPT to write code to determine if it is historically profitable to buy a stock when its 20-day simple moving average crosses over its 200-day SMA. It’s just one of hundreds of possibilities.

Identify Key Trading & Investing Risks With Chat GPT

For any successful investor, risk management is just as crucial as an analysis of investment opportunities. The greatest investors understand that not only should they identify lucrative stocks, but also keep a close eye on the potential pitfalls and be prepared to withdraw their investments. 

If you’re uncertain what the main risks associated with a company are, just ask ChatGPT and get some ideas to start you off.

When we posed the question “what are the key risks associated with investing in Tesla” to ChatGPT, it identified a remarkable ten main risks. That’s certainly an excellent place to start!

In terms of risk, I believe that market competition and new entrants has the potential to be the most detrimental. 

Therefore, we’d investigate further and examine Tesla’s recent price cuts, which can be seen as a result of competition in the EV market intensifying and potentially leading to an “EV price war”. I’d view this as a key risk and analyze how it will affect Tesla’s profit margins – especially when taking into consideration its high valuation (risk #8 from ChatGPT’s list).

Chat GPT Limitation When Analyzing Stocks and Currencies?

It goes without saying that ChatGPT isn’t perfect, as no AI technology currently is. If you decide to use it for stock analysis, you should be aware of its limitations. 

For example, it will likely struggle to answer inquiries about lesser-known companies; as such, we chose Tesla for my examples because of its well-known status.

ChatGPT’s training data is stuck in 2021, meaning any of its responses might lack crucial info if something notable transpired within the company or industry in the past year. It’s a big setback that needs to be considered.

Finally, the AI occasionally renders answers that are plainly erroneous – let’s not mince words here. Take for instance when it said to us “Tesla is expected to benefit from increasing competition in the EV market” – it doesn’t take an MBA degree to figure out that more competition is hardly beneficial for a company.

ChatGPT can be an incredibly useful asset for investors, allowing for a more efficient and straightforward analysis of stocks. 

With its benefits outweighing the drawbacks, you can use ChatGPT to simplify your investing strategies and make life easier. To put it simply, why work harder when you can work smarter?

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