Ken Griffin’s hedge fund, Citadel LLC, has been called the most profitable hedge fund in history. It currently manages around $68 billion, and has posted average annual returns of 19.2% after fees since 1990.
The fund is highly analytical, employing 260 PhDs who use 100 petabytes of data to make daily trading decisions. The firm is so active in its trading that it’s often credited with coining the phrase “high-frequency trading.”
Earlier this month, Griffin gave his opinion on several ongoing market trends — everything from geopolitical tensions to artificial intelligence. Investors of all kinds would be wise to hear what he has to say.
Here’s what Ken Griffin thinks investors should understand about AI right now
Griffin spent a lot of time talking about AI, a technology he thinks most people still don’t fully understand. He began by sharing a story of asking business leaders how AI has transformed their businesses.
“I couldn’t help myself. I’m like, ‘Let’s go around the table and share stories about how AI is transforming your business,'” Griffin said. What he got back were four or five “incredible stories” all talking about so-called productivity gains. But after digging deeper, Griffin determined that “not one involved AI.”
Instead, he believed the gains were realized using other, more elementary methods like data optimization and digitization. Griffin thinks that a lot of people are labeling things “AI” that are simply employing the use of other technologies.
Image source: Getty Images.
According to Griffin, the “nuance between AI and technology writ large gets a little bit lost” when discussing any sort of tech implementation these days. He said: “There is a technological revolution happening, of which AI is a component of the story, but it’s just a piece.”
This last observation is important for investors to understand. Many publicly traded companies are claiming that they are either developing AI technology or implementing AI into their workflows. However, it’s critical for investors to remain skeptical about these claims. Whether investors are considering a chipmaker like Nvidia (NVDA 1.97%) or quantum stocks like Rigetti Computing (RGTI +0.11%) or D-Wave Quantum (QBTS 0.95%), it’s critical to determine how much a company is exposed specifically to AI versus another technology altogether.
Perhaps Griffin has also made the same mistake in the past. Previously, he dismissed artificial intelligence. “I was with one of my colleagues who runs our commodities business and he handed [me a] report that we generated with an AI engine,” he said earlier this year. “The first few sentences, like wow that’s really insightful and then you go down below that and it’s all garbage.”
Just a few months later, Griffin is changing his tune. Now, Griffin thinks AI will set off a “golden age of entrepreneurial activity” in which a handful of scrappy entrepreneurs can challenge powerful incumbents by leveraging AI. Griffin likely came to this conclusion by developing a better ability to discern what is AI and what is not. Investors would be wise to follow his lead.