Generative AI 101: What You Need to Know Before Investing

GenAI basics, investing opportunities and risks, valuation, and lessons from previous tech revolutions

Stephen Foerster

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Photo of a robot
Photo by Owen Beard on Unsplash

We’re in the early stages of an exciting technology revolution. In the fall of 2022 OpenAI introduced an artificial intelligence (AI) chatbot, known as ChatGPT, to the masses. ChatGPT follows an instruction in a prompt and provides a fluent answer, seemingly as if a human were responding. The prompt can be frivolous, like “Create a limerick about Donald Trump” (see below for ChatGPT’s clever rhyme).[i] Or it can be practical, like “Create a Python program to read five years of monthly price data from Yahoo!Finance for twenty stocks to find optimal weights for stock portfolio risk-return optimization.” Marvelous stuff! This latest iteration of AI, known as generative AI or GenAI, is truly a game changer. But as an investor, you might be wondering, “How can I make money by investing in stocks that will benefit from this revolution?”

This isn’t a new question. Investors have considered such a question for almost two centuries, whenever a new technology has appeared — from railroads to planes to automobiles, and just a generation ago, the internet. The answer is never a simple one. And I’d be very leery of anyone who provides a simple answer, such as “10…

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Stephen Foerster

I’m an award-winning author and Finance prof, CFA. I write stories about investing and investment history. (I don’t give financial advice.)