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Specialists predict generative synthetic intelligence (AI) will automate many routine duties within the coming many years, including trillions to international productiveness. Many of the innovators main the cost are within the S&P 500, which jumped 23.3% increased final 12 months.
Can AI automate stock-picking concepts for me? Effectively, over the weekend, I requested ChatGPT for its ‘best 3 S&P 500 stocks for me to buy for the next five years’. Right here’s the trio it got here up with.
Behold the bot’s solutions
The app’s prime choose was Nvidia (NASDAQ: NVDA), which it stated is “driving the AI revolution” in knowledge centres with its main graphics processing models (GPUs). It’s positioned because the “picks and shovels supplier in a gold rush“.
Subsequent, ChatGPT went for Microsoft. It stated the software program big has “transformed into a cloud and AI leader”. Its Azure platform’s fuelling international digital transformation, whereas the agency enjoys enticing recurring subscription income.
Lastly, the AI assistant named Visa (NYSE: V). The funds big thrives as a “toll collector” that’s benefiting from the shift in direction of a cashless world.
My ideas
My preliminary response to those picks is that they’re very robust. All three corporations are market leaders, with formidable aggressive benefits, distinctive revenue margins, and top-tier administration.
Alternatively, I additionally suppose they’re very apparent. With $3trn+ market-caps, Nvidia and Microsoft are the second- and third-largest corporations within the S&P 500. In the meantime, Visa’s a $617bn juggernaut.
I’ve owned Nvidia shares previously, whereas Visa stays one among my prime holdings. Alas, I’ve by no means purchased Microsoft inventory, however I may get good publicity to it merely shopping for an S&P 500 index tracker fund.
As anticipated, ChatGPT summaries their enterprise fashions and strengths nicely. Nonetheless, the data it rattles off is sort of generic and could be discovered wherever on-line (unsurprising on condition that’s the place it sourced it from).
Inventory-specific dangers
The bot affords no elementary evaluation, failing to say for instance that Nvidia’s gross margin has dipped from 78.4% in Q1 2025 to a forecast 73.5% in This autumn 2025.
Moreover, there was no point out that Nvidia inventory’s buying and selling at an eye-watering 32 instances trailing gross sales. If the agency’s future progress trajectory finally ends up decrease than anticipated, the valuation might not be sustainable.
Microsoft inventory’s in an identical place, buying and selling at an expensive 32 instances ahead earnings. A lot AI-fuelled progress’s already priced in, together with that of ChatGPT guardian OpenAI (which Microsoft has a big stake in).
For Visa, ChatGPT overlooks Vice-President-elect JD Vance’s Credit score Card Competitors Act. This invoice goals to cut back card swipe charges (usually 2%-4%) which can be shared by fee processors like Visa and the card-issuing financial institution. If handed, this invoice may affect Visa’s revenue margins.
This doesn’t imply I’ll be promoting my shares nevertheless. Visa’s lobbying closely in opposition to such laws, arguing that it may result in unintended penalties for companies and customers. However this context can be helpful for folks to know earlier than deciding whether or not to speculate, I’d argue.
I’ll maintain tabs on these
I definitely wouldn’t guess in opposition to this trio outperforming over the following 5 years. What I’ll do is observe their efficiency to see in the event that they actually do change into the easiest S&P 500 shares to purchase proper now.
