AI picks fail to beat S&P

At least 13 exchange-traded funds have put artificial-intelligence applications in charge of managing their portfolios. Almost all have missed out on this year’s tech-led market rally and are lagging behind benchmark indexes such as the S&P 500 ...

-bloomberg today


Meanwhile the best of the AI stocks, Nvidia, reports earnings tomorrow after the close.

They are the only AI company actually making money from AI. Their chips are sold out as others who want to do AI are buying all they can.

If they blow out their numbers as well as some hope, your AI statement could be old news. Lots of speculative investing going on in AI based on future promises. Nvidia is delivering now.


AI is just a big domain with so many different qualities of AI. It all boils down to the developer of the AI and how good the creators are in creating the AI. Seriously, I find the term “AI” is so overused that to me, unless it is Sentient, it is not really AI but just a neural network of decision making nodes.

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I agree. AI is the buzz word of the moment–especially for tech stocks. Nearly everyone claims to have an AI component or project.

Lots of creative energy and investment is implied. Of course some are way ahead. But of course major improvements in software are possible.

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Returns for AI-Run ETFs are poor so far. For example, the AI Powered Equity ETF (AIEQ) gets one star on Morningstar, and its 5-year annualized return of 3% is abysmal (98 Percentile Rank in Large Growth). Apparently winning Jeopardy! doesn’t show stock picking skill.

Hedge Funds will find a successful AI method long before ETFs. Data, computers, and statistical methods have long been used to pick stocks. AI adds another layer in the process. This is a difficult task and so there will be many failures along the way. But humans are somewhat predictable, and so AI stock picking will win out at some point, maybe in 20 years.

Returns since May 30, 2023:

ticker  Return
 AMOM     6%
 AIVL     5%
  VTI     5%
  SPY     5%
  QQQ     4%
 AIEQ     1%
  MCD     -1%
  PEP     -3%
  DOX     -9%

=== links ===
Factor Analysis (4-factor model) shows negative alpha for AMOM, AIVL, AIEQ, MTUM, and QUAL over the past 4 years. The longest period available is for WisdomTree US Al Enhanced Val ETF (AIVL) [Jul 2006 - Jul 2023], and it shows an alpha of zero. As a comparison: SYLD, COWZ, and SCHD have positive alpha [Jan 2017 - Jul 2023].

AI-Run ETFs Keep Missing the Mark, Aug 21, 2023
“There are at least 13 different ETFs managed by artificial intelligence, according to an analysis published Monday by The Wall Street Journal, and almost all have underperformed the broader market this year. Ironically enough, it’s mostly because AI didn’t go big enough on AI… The WisdomTree U.S. AI Enhanced Value Fund (AIVL) is up just 2.2% this year, thanks in large part to its skepticism of Meta’s stock, which has spiked 135% since December.”

Beating the benchmark? How AI-driven ETFs stack up, Aug 2 2023
The QRAFT AI-Enhanced U.S. Large Cap Momentum ETF (AMOM), for example, uses an artificial intelligence system to select large-cap stocks
The AI Powered Equity ETF (AIEQ) is among the oldest to harness AI technology, by using IBM’s Watson platform to analyze thousands of U.S. companies for stock selection.

Can Stocks Picked by Artificial Intelligence Beat the Market? 3 Stocks to Watch, May 30, 2023
“After churning through 10,000 daily indicators, Danelfin’s algos produce a series of scores. The AI Score, which ranges from 1 to 10, indicates a stock’s probability of beating the market over the next three months, or roughly 60 trading sessions. (Higher scores are better.)…
Amdocs (DOX), Market value: $11.5 billion, AI Score: 9.0
McDonald’s (MCD), Market value: $208.0 billion, AI Score: 9.0
PepsiCo (PEP), Market value: $250.0 billion, AI Score: 9.0”

Our AI - The Future of Machine Learning Financial Planning
“Well, it simply won’t work if you just go on the web and download a Neural Network or Support Vector Machine software package, handing it a bunch of data, and sitting back and waiting for results! Rebellion Research had failed at this for 4 years before we finally found a path to success. … Rather than finding out which stocks are likely to outperform, and by how much, Rebellion Research repositions its learning problem to seek the styles of investing that will likely perform well in the future… That brings us to the second modification Rebellion Research made: we use a modified Bayesian Learner.”

The Rise of the Artificially Intelligent Hedge Fund, Jan 25, 2016
“Last week, Ben Goertzel and his company, Aidyia, turned on a hedge fund that makes all stock trades using artificial intelligence”


There is no mention of AI in the Aurum Hedge Fund Data. Quant funds were about 13% of total hedge fund AUM in 2022.

Quant Hedge Fund AUM in 2022: $379B
CTA: $140B
Macro: $102B
EMN: $57B
Stat Arb: $50B
Risk premia: $30B

Quant strategy analytics pack, 12 months to December 2022
“Quant Funds trade securities based strictly on the buy/sell decisions of computer algorithms. Quant strategies primarily fall into the following categories: Quantitative Equity Market Neutral (EMN), Statistical Arbitrage, Quant macro/GAA (Global Asset Allocation), CTA (Commodity Trading Advisors), and risk-premia.”

Hedge fund industry performance deep dive – Full year 2022
“Hedge fund assets covered by the Aurum Hedge Fund Data Engine ($2.97 trillion as at year end) shrunk over the year – driven by a combination of net negative performance – net losses stood at $76bn – and net outflows at $145bn”


I now have a 15-bagger with NVDA; not mechanical, but enjoyable.

Nvidia reported its second quarter earnings after the bell Wednesday blowing away already sky high expectations for the graphics chip giant as the AI hype train keeps plowing forward. The company reported a 101% year-over-year jump in revenue while adjusted earnings per share rose 429%.

Nvidia also issued revenue guidance of $16 billion plus or minus 2% for the current quarter, eclipsing Wall Street’s already lofty expectations of $12.5 billion.



Yes, at the 501.70 after close number I’m up 32.24x according to CAPs. This has never happened to me before. Had some other good ones but sold too soon.

Its a nice problem. Fund to have.


Verry verry fund to have!
I’m standing near by, as the tide ebs and flows.


The only winner in this AI race is the “weapons supplier” - NVDA