Artificial Intelligence could become the Wall Street investor of the future

Avatar By Lliane Hunter | 2 years ago

Kai-Fu Lee, China’s most famous venture capitalist and former Microsoft and Google executive tells Quartz that he no longer trades stocks with humans.  This is because he predicts that Wall Street will be one of the first and largest industries to be automated by artificial intelligence.  The venture capitalist believes that big banks will be outmaneuvered by smaller startups able to deploy new technology much faster.  He’s testing out his prediction with his own resources.

His firm, Sinovation Ventures, has started to invest in this arena by financing Smart Finance Group, a company that algorithmically determines eligibility for payday loans. Lee expects the company’s algorithms to pay out $30 million in loans this year—a scale that wouldn’t have been achievable through human labor.  Moreover, Lee is testing three algorithmic trading systems for his own wealth, trading in currencies, arbitrage, and a portfolio of its own choosing.

Although from an older era, big banks are aware of this new competition. In fact, large financial institutions have the ability to work at a much larger scale.  Speaking at a conference last summer, JPMorgan CFO, Marianne Lake spoke to attendees of her bank’s commitment to technology and development (JPMorgan has assigned 9% of its revenue to this endeavor).  “We’re willing to invest to stay ahead of the curve, even if in the final analysis some of that money will go to product or a service that wasn’t needed,” she said.