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The ongoing artificial intelligence (AI) revolution is certainly shaking up the stock market at the moment. Yet AI tools, such as ChatGPT, can be used to help guide an investor or get a second opinion on which shares to pick. Yet when I asked it to select some growth stocks for me, some of the choices were a bit unusual.
Definitely not top marks
ChatGPT picked five companies it called “quality growth” stocks. These were RELX, Experian, London Stock Exchange Group (LSE:LSEG), Sage Group and Rightmove.
Let’s start with the fact that all of the picks are down over 20% in the past year. Typically, growth stocks are firms experiencing high demand for their products or services, meaning the company’s growing rapidly. This is usually translated into a rising share price. So I think ChatGPT may have confused value picks with growth picks, which isn’t a great start.
Even if we look at the scope for future growth, a couple of the choices still confuse me. One of the reasons behind the recent large declines in Rightmove and Experian has been concerns about AI disruption. The released tools can provide some of the services these companies offer. It can process the information faster, without friction and for free! Of course, I’m not saying the related firms are going out of business, but they wouldn’t be the hottest picks right now, given this risk.
One point I’ll acknowledge is that a Stocks and Shares ISA is the best place to house the portfolio. This is because people don’t have to pay capital gains tax when they sell a stock. Given the growth names will hopefully stage large long-term share price rallies, this is a big advantage.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Adding in my view
The one pick I do agree with is the London Stock Exchange Group. Even though the stock’s down 25% in the past year, it has great growth prospects.
By contrast to other companies’ AI concerns, I believe AI’s more of a benefit than a worry for the company. Some investors feared AI would commoditise financial data. Instead, LSEG’s partnering with major platforms (like OpenAI and Snowflake) to embed its trusted proprietary datasets into AI-driven workflows.
After all, AI models need high-quality licensed financial data to make accurate decisions and LSEG owns one of the most trusted global financial datasets. Ultimately, that should serve as a powerful reason to buy the stock as AI adoption accelerates.
Another factor is the push by activist investors to make the company more efficient and profitable. For example, Elliott Investment Management has built a large stake in recent weeks and is pushing for what it calls “value-creation measures”. I see this as a positive influence, giving the LSEG management team the kick it needs to work harder.
Of course, there are still risks. One of the reasons behind the fall this year is the concern that the UK’s losing its influence when it comes to companies wanting to go public. The lure of America and other markets could further hinder revenue from this division. Yet I do believe it’s a growth stock worthy of consideration right now.
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