OpenAI is an artificial intelligence nonprofit founded in 2015 and backed by Tesla CEO Elon Musk. The company has developed and launched ChatGPT, an AI chatbot that uses reinforcement learning from human feedback (RLHF) machine learning technique, which allows the chatbot to use its training to determine the most logical chain of words that can be put together to form a coherent response to human interaction. 

ChatGPT can quickly analyze and respond with relevant information to user questions and can hold a conversation regarding a broad range of topics. 

“ChatGPT is scary good. We are not far from dangerously strong AI.” - Elon Musk

In finance, ChatGPT can be useful in identifying relevant information from links to articles and documents, which saves a lot of time and can be incredibly useful for anyone conducting financial analysis of varying complexity. 

To demonstrate the capabilities of ChatGPT and how it can be useful in financial analysis, we can ask the AI some questions and give it tasks to analyze Apple Inc. A step-by-step approach with ChatGPT can go a long way in identifying all the relevant information an individual investor or a junior analyst might need to know about Apple Inc and its financials. 

“ChatGPT is a fascinating technology that has the potential to transform the way we communicate with machines.” - Andrew Ng

Doing so can help investors and analysts identify the advantages and disadvantages of using ChatGPT in the analysis of stocks and other financial instruments. 

Step 1: General Questions

Using ChatGPT for financial analysis can be considerably easier than it seems. For example, analysts and investors will look at certain important metrics and data points from a company’s earnings report to determine the financial and operational standing of the business to make future decisions based on those observations. Some of those metrics include:

• Total revenues
• Net income
• Diluted earnings per share
• Total assets
• Total liabilities
• Total debt
• Shareholder’s equity
• Total cash 
• Free cash flow

These are only a handful of such financial data points to consider. Linking ChatGPT to an earnings transcript and simply asking them to point out the desired metric is incredibly easy and requires a single, straightforward command. 

As seen in the example, ChatGPT was able to identify all key metrics from Apple’s financial statements and present them in a concise manner. 

We can also ask ChatGPT to use the financial data to calculate financial ratios. For example, let’s assume we want to find the debt/equity ratio from Apple’s Q1 2023 financials:

As we can see, Apple did not mention its debt position in the earnings call, which can prompt investors to look for the data elsewhere or to ask ChatGPT to go through a different document to find the desired data. 

Similarly, users can ask ChatGPT any number of such questions, which are easily observed by the AI and feedback is instantaneous. 

Step 2: Gathering Data

As our next step, we can ask ChatGPT to analyze data from documents of any kind. For this example, let’s use the Q1 2023 earnings call transcript from Apple and ask ChatGPT to highlight some key data points. 

As evident from ChatGPT’s answer, Apple’s earnings call for the quarter was quite positive and highlighted some key operational milestones, such as:

• Increased iPhone sales YoY
• Revenue increases from sales in China
• Share repurchases of over $30 billion
• Strong service revenue growth YoY

ChatGPT also highlighted the ongoing supply chain constraints facing Apple but added that the overall results leave room to be excited about the company going forward. 

Step 3: Complementary Tasks 

We can also ask ChatGPT to provide some information that was not included in the earnings call transcript. For example, we can ask the AI to list some of the competitive advantages working in favor of Apple, as well as the inherent risks associated with investing in the company.

As we can see, ChatGPT highlighted 8 key competitive advantages Apple can use to get ahead of the competition in the long run, which are:

• Brand reputation
• Design
• Customer loyalty
• Ecosystem
• Integration
• Innovation
• Supply chain
• Marketing

While not strictly financial advice, users can use ChatGPT to overview any publicly listed company to get some insight into the business. ChatGPT can also conduct a SWOT analysis of the company to highlight its strongest and weakest points. Knowing this can help investors make informed decisions using AI. 

Before we sum up the overall experience of using ChatGPT as a personal financial analysis tool, it would be beneficial to go over some of the general advantages and disadvantages of ChatGPT when it comes to finances and the stock market in particular. 

Pros

• Fast - ChatGPT provides results and answers within seconds, which saves a lot of valuable time for financial analysts and individual investors alike
• Versatile - ChatGPT can be a useful tool for people of all backgrounds and interests, as the AI has access to an incredibly extensive amount of information and can deliver answers within seconds
• User-friendly - ChatGPT is easily accessible via a valid email address and phone number. The simplistic chat design makes it easy to interact with the chatbot and users can simultaneously hold different conversations with the bot interchangeably
• Memory - ChatGPT is able to memorize previous conversations and users can pick up where they left off without losing the context of the conversation

Cons

• No advisory capabilities - while ChatGPT might be able to give responsible advice in certain areas, it is not designed as an advisory tool, which becomes especially evident when discussing finances. The chatbot is not authorized to solicit financial advice
• Limitations - ChatGPT is constantly learning and evolving. Thus, this AI might not currently have as many analytical features as it might in the future 
• Lack of emotion - When it comes to trading, emotions can be half the battle. However, ChatGPT does not have the capacity to grasp such concepts and provides dry, numbers-based responses. This could also be seen as a positive by some, but when it comes to market sentiment these responses are not very helpful
• Longevity - it is uncertain what direction OpenAI will take with ChatGPT in the future, which makes it tricky to rely on the platform long-term

• ChatGPT is an AI developed by OpenAI that uses the machine learning technique called reinforcement learning from human feedback (RLHF) to conversate with humans
• The chatbot can discuss a broad range of topics, but comes with its fair share of limitations
• When it comes to financial questions and topics, ChatGPT is not authorized to give financial advice, but can gather relevant data from documents and provide general information about a wide range of financial instruments
• ChatGPT is able to fetch financial data from Apple’s Q1 2023 earnings call transcript, which saves a lot of time for analysts and individual investors doing research on Apple
• ChatGPT can conduct SWOT analysis on a wide range of publicly listed companies 
• While ChatGPT can be a great auxiliary tool, it cannot replace real financial analysis, as it is primarily a conversational AI which is not strictly design for financial analysis