Many veteran investors will remember how they used their first £1,000 to buy UK stocks. For my part, I enjoyed some success but also made plenty of mistakes.
Today, investors are increasingly turning to artificial intelligence (AI) tools for inspiration — something I couldn’t do back then! But, is ChatGPT any good at helping individuals make the right decisions in their wealth-building journeys?
Here’s what OpenAI’s chatbot would do with a cool grand to invest in UK shares.
A broadly solid framework
My virtual assistant started well, offering sound advice right off the bat. It preached about the benefits of diversification and the importance of establishing clear investing goals. ChatGPT also stressed that buying UK stocks carries risks, including capital losses.
Overall, it’s hard to fault my cyber companion’s run-through of Investing 101. If I was being picky, it would have been nice to see references to the merits of tax-free investment vehicles like Stocks and Shares ISAs or Self-Invested Personal Pensions (SIPPs). Regretfully, ChatGPT was silent on this subject.
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UK stock picks
But, how did the chatbot fare on specific stock market picks?
Well, it’s a fan of the FTSE 100. A string of large-cap shares formed the bulk of its selections. They included pharma titans AstraZeneca and GSK and dividend stocks Diageo, Unilever, and BT.
My robotic pal didn’t completely limit its ambitions to the Footsie. For instance, growth shares Ocado and Deliveroo also star in the collection. Curiously, so does Nvidia. ChatGPT acknowledged this isn’t a UK stock, but cited its popularity among British investors as justification for its inclusion.
All of these companies face risks and opportunities. I’m bullish on some of the digital genie’s choices, less so on others. In fairness, I think it’s a largely credible and balanced basket of UK shares for a £1,000 investment.
However, I have a bone to pick with ChatGPT’s final idea.
Buyer beware
The last UK stock to make the cut was online cosmetics and dietary supplements retailer THG (LSE:THG), which owns brands such as Myprotein, Cult Beauty, and LOOKFANTASTIC.
The THG share price chart makes for ugly viewing. A disastrous 95% collapse over five years means long-term shareholders are nursing deep wounds. So, what does ChatGPT see in the beaten-down e-commerce stock?
Well, it referenced the company’s “strong revenue growth since its inception“. That sounds great. The problem is, it isn’t true. Not only did THG experience an 8.7% revenue slump in FY23, but that trend continued in FY24 with a further 2.5% decline to £1.7bn. To make matters worse, it continues to be a loss-making business.
In addition, a forward price-to-earnings (P/E) ratio above 68 means the stock isn’t particularly cheap either. That said, there’s some cause for optimism. A strategic demerger of its technology services arm, Ingenuity, was completed this year. Some analysts hope the new streamlined outfit will be more cash-generative and less capital-intensive, but it’s not enough to convince me to buy the shares yet.
Although it produced some pearls of wisdom, the fact that ChatGPT spews out false information is a huge red flag. I’d always take what the AI bot says with a pinch of salt and conduct my own due diligence before investing any cash.
