Renowned scientist Stephen Hawking recently made the dangers of Artificial Intelligence aware (AI), warning that they could become better at predicting trends, and outsmarting humans in the financial markets; making the possibility of Artificial Intelligence taking over the stock market even more possible. Hawking says this danger is very imminent.
The foundation of the stock market is a system that assigns values to companies through the selling and buying of stock. So far, the stock market has been a human-based system. In that the values placed onto companies are relatable to humans’ understanding of worth. Smart computers are beginning to make their foray into the markets. They calculate the success of a business and indicate to shareholders whether it would be wiser to sell or buy more. It does these calculations extremely fast and very often. The dangers of this is that shares are being sold off quicker than ever. Companies cannot make use of a lot of the money they get from the markets because it is taken away too soon. The instability makes it more difficult for companies to improve or evolve according to economists.
The Flash Crash of 201o has been cited as a prime example of the dangers of Artificial Intelligence manipulating stock. On May 6, 2010, everything seemed to be going normally on Wall Street. There were protests in Greece from workers protesting austerity. Every time news of these disgruntled employers surfaced, the Dow Jones would drop. The Dow lost 100 points in seconds, then 200, 300, 400, and 500. The Dow dropped to an unprecedented 1,000 points and lost $1 trillion, but perhaps even more surprisingly, the Dow immediately began to increase. The most dramatic episode in stock market history occurred in 10 minutes.
Some experts suggest that Artificial Intelligence manipulation taking over the stock market could be an explanation for the flash crash. When news about the unrest in Greece began to surface, the intelligent computers insisted shareholders to sell more than their human counterparts would have. Then once the stockbrokers realized what was happening, they took control and restabilized the Dow.
Supporters of incorporating AI into the stock markets suggest that highly capable technology could support new and struggling businesses. Artificial Intelligence based systems can scour the internet for undiscovered companies that show upside potential in the market and introduce them to shareholders. It accomplishes this is in a very short amount of time and is more reliable than a human evaluating a company. Thus, new startup companies that show promise, which may have been ignored by human stockbrokers previously, will be discovered and evaluated fairly and given a chance they may not have.
Those who fear that Artificial Intelligence could take over the stock market believe that their takeover could lead to a stock market crash. Not only would they eliminate jobs, but they will be making predictions on things some analysts say are unpredictable. They suggest that creativity is a critical and deciding factor in the success or failure of a good company. Despite their objections, AI computers continue to make their way into the markets.
By Andres Loubriel