Advice that is generalized, overconfident, or lacking concrete data is probably bad, they said.
It’s hardly news that people are finding ways to use AI to make investment decisions, but there are risks to depending on a chatbot to tell you have to put your money to work.
Trading and investment forums like Reddit’s Wall Street Bets are rife with stories of investors claiming ChatGPT helped them become better trader. Indeed, there are some good uses for the tool.
“AI can literally do everything that it took me six years to learn,” the trader Erik Smolinski said, adding that he primarily uses it for data and analysis, specifically slicing through complex data.
But are stories like his the norm, and what are the risks of using AI to tell you how to invest? Business Insider asked a few finance pros for best practices if you want to leverage AI-generated advice.
Confirmation bias is a significant concern when investors ask AI models for trading advice, particularly with regards to emerging companies, as there may be less information about them available.
“In my experience, LLMs often pull from a small, self-reinforcing pool of sources when analyzing early-stage or niche projects,” said Markus Levin, cofounder of blockchain firm XYO. “That usually means company press releases, founder posts on X, Reddit threads, and carefully managed media appearances.”
Levin said that while proprietary models used by trading firms can generate high rates of success, they are different from what’s available to retail investors. “They’re asking public LLMs questions like, ‘what project will 5-10x this year?’ and treating the responses as investment insight. That’s where the real risk lies,” he added.
Eric Croak, president of Croak Capital, was more blunt about his view of AI-generated advice, describing it as “algorithm-assisted gambling.”
“I believe what makes AI dangerous with crypto and options specifically is its inability to explain asymmetric risk in real terms,” he said, noting that these bots can easily omit important factors such as tax consequences or liquidity concerns.
Croak isn’t the only expert who sees high risk in allowing AI bots to make trading decisions.
“The AI tools have zero accountability to a board or the law, so users beware,” said personal finance coach and educator Linda Ta Yonemoto. “AI advice that leads to tax penalties or investment losses means you’re on your own.”
