Is the Stock Market Prepared for the Influx of AI?

The rise of artificial intelligence (AI) has sparked concerns about its impact on financial markets, as fake images generated by the technology could cause investor panic and market instability. In May, a photo of an explosion at the Pentagon circulated on social media, causing US financial markets to dip briefly as investors feared an attack. Although the image was quickly determined to be fake, experts warn that as AI generates increasingly realistic images, it poses a threat to market stability until there is an easy way to spot a fake. However, some argue that algorithmic trading using AI could actually increase market stability. Algorithmic trading involves a computer using an algorithm to make trades based on past patterns, and while high-frequency trading can cause short-term market volatility based on headlines and rumors, low-frequency trading is favored by hedge funds and is less susceptible to reacting to short-term fluctuations. Despite concerns about the impact of AI on financial markets, some experts warn that investors are overly concentrating on tech stocks, which could be risky if sentiment towards AI or tech shifts.