AI tools for investing are only just starting to show up in professional money management, but the excitement about their potential is growing. Paul Johnson, who teaches value investing at Fordham’s Gabelli School of Business, says these tools could make investors a lot more efficient. What they won’t do, he argues, is replace human judgment.
“AI is very good at digesting lots of information,” Johnson said. “But whenever you compress information, you risk losing nuance.”
That leaves a big question hanging: When everyone is using the same AI investing tools—imperfect as they may be—how will that affect the market? Will value investors need to change their strategies in the age of AI?
Here are a few ways AI tools could reshape the future of value investing, and how savvy investors can adapt.
1. Shrinking (and Shifting) Opportunities
Value investing is an investment strategy built on identifying when a company is worth more than the market currently believes. Traditionally, that requires understanding a company’s business model, risks, management, and long-term value in ways others haven’t yet recognized.
But what happens when AI can scan massive datasets and make those connections for millions at once?
Johnson says AI could shorten the window in which undervalued stocks remain undervalued. “If these tools can process data and written information quickly,” he said, “then that information should be absorbed in the market quickly.”
But this won’t necessarily eliminate opportunities, Johnson said. It may create new ones.
“If everybody’s using the same tools, they’re all going to come to a very similar conclusion. And that conclusion could turn out to be wrong,” he said.
Those with independent judgment could be richly rewarded for investing in an overlooked company or sector, or for shorting (essentially betting against) an overhyped stock.
2. Accelerating Herd Behavior
If large numbers of investors are steered toward the same judgments at once, another risk is an increase in manias or panics, when people buy or sell en masse, Johnson said.
The dot-com bubble is an example of a mania, when everyone piled into tech stocks at once, driving up stock prices beyond their true value. When new information challenged that consensus view, the bubble burst just as quickly.
These market corrections “tend to be ugly,” Johnson said. Stock prices may have to fall sharply before investors are willing to step back in. And if AI reinforces this kind of group-think, it could make such episodes more extreme.
3. The Productivity Effect
Johnson emphasizes that AI’s biggest impact is likely to be an increase in productivity.
These tools can speed up tasks like researching unfamiliar companies or checking risks against predetermined frameworks. “They have a lot of promise to augment your process,” Johnson said.
Like spreadsheets and the internet before, AI may raise the baseline-level of competence across the financial industry. That could make it harder to find an edge.
“It’s likely going to increase the level of competition,” Johnson said. “But that’s been going on since the dawn of time in the market.”
4. The Limits of AI Judgment
Johnson noted that while AI can summarize information well, it can also answer confidently and persuasively even when it’s wrong.
He described an instance when he tested ChatGPT with a historical finance question. It provided two wrong but plausible answers before finally landing on the right one.
This matters for value investing because, as Johnson put it, “We don’t know if it can go to that next level”—the level where it makes sound investment recommendations. Investors who don’t understand the limits of AI may simply trust the tool, especially if everyone else is doing the same.
Still, Johnson says value investing will remain essentially the same. Tools will improve, investing will become more competitive, but the timeless challenge remains: understanding what a business is truly worth and how other investors are likely to misjudge it.
“You should use AI to make you better at your job,” Johnson said. “But judgment is still the key.”
