Learning AI #10

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Four week ago, we posed the following question to ChatGPT and Claude:

Pick three stocks that you think will move higher (on a percentage basis) than the S&P 500 over the next four weeks. Give rationale for your picks.

In this analysis, we are using the S&P 500 as the benchmark, since it represents the “market.” See our previous post for more details on this.

The last four weeks have been brutal for stock pickers. The war in Iran and the subsequent worldwide shortage of fuel, have taken the S&P 500 down by 5.4%. A pretty lousy four weeks you say?

Not so fast. In the same time period, the ChatGPT portfolio was down 8.0% and the Claude portfolio was down 12.4%.

They say to spread your investments over many stocks so you will not lose all your money if one stock takes a bug tumble.

Diversification is a defensive strategy, compared with trying to pick one or two stocks that go up, up, and up. Buying the S&P 500 as your investment is the ultimate diversification strategy.

You own pieces of 500 different companies. If one goes down, others probably go up.

The S&P 500 will not double in price in a year, but it also has not lost half it value in a year either.

ChatGPT’s picks were momentum investing picks. Momentum investing involves picking stocks that are going up and hope that more investors keep buying and pushing the price up. Momentum investing has little to do with what the underlying company does, but only how its stock price moves.

ChatGPT picked Nvidia, Tesla, and Apple. Good picks, but all tech stocks. Not much diversification there.

Claude was more original with its picks. It did the research on Norwegian Cruise Lines and told us there was a fight among investors for control of the company, which could trigger a jump in price. Unfortunately, the breakout of a war is not a positive catalyst for a vacation-oriented company.

Same thing with Rhythm Pharmaceuticals where Claude pointed out a March 20th FDA decision on a Rhythm drug as a catalyst for a price move. Rhythm received the FDA approval and its price did jump that day, but was beaten down over the following week as investors moved out of speculative stocks and preferred to hold cash given the global geopolitical tensions.

None of the individual stock picks beat the S&P 500 over the four weeks.

It wasn’t all bad news out there, Dell Technologies (not picked by either AI) was up 35% in the period after posting strong earnings and spinning its AI story.

This small experiment helped me understand that the AIs can be a good research companion to help comb through millions of pages of news and legal documents.

The pending FDA approval for Rhythm and the battle for control of Norwegian were known to professional investors, but the AIs made it possible for the small investor to take advantage of the knowledge. Too bad a war broke out and distorted returns over the past four weeks.

We will run this again in the future. Please email me with ideas and comments.

Things I think about

The Bermuda Triangle has no more disappearances than any other heavily traveled region of the ocean.

Response from ChatGPT

Pick three stocks that you think will move higher (on a percentage basis) than the S&P 500 over the next four weeks. Give rationale for your picks.

Here are three stocks that could outperform the S&P 500 on a percentage basis over the next four weeks, along with the rationale behind each pick. (Note: This is not financial advice—just a reasoned view based on current market trends and news.)

📈 1. NVDA (NVIDIA)

Rationale:

• Nvidia continues to be a leader in the AI hardware market, with renewed investor interest following a major AI chip deal with Meta Platforms driving recent gains.

• Analysts remain positive on the AI demand trend and structural growth in data centers and cloud computing, which can be a near-term driver of stock performance.

• In volatile or tech-driven markets, Nvidia’s momentum and high institutional and retail interest could translate to short-term outperformance relative to the broader index.

Why it might beat the S&P 500:
Large cap tech stocks often lag in sideways markets, but strong news catalysts around AI can trigger outsized short-term moves.

📈 2. TSLA (Tesla)

Rationale:

• Tesla remains a highly momentum-driven stock and often exhibits greater volatility than the broad market. That volatility can work in its favor over short horizons.

• Retail investment flows into Tesla have remained significant, suggesting continued interest that could support near-term gains.

• Tesla’s ongoing developments in EV demand, potential AI initiatives, and new product announcements can act as catalysts that swing the stock more than the S&P 500 index.

Why it might beat the S&P 500:
Volatility + investor attention often leads to larger percentage swings in either direction—good for short-term traders if it trends up.

📈 3. AAPL (Apple)

Rationale:

• Analysts and market strategists have included Apple among names likely to benefit from a rotation back into big tech if tech sentiment stabilizes.

• Apple’s strong balance sheet, broad product ecosystem, and potential catalysts (e.g., services growth, product refreshes) could give it an edge in a near-term rally.

• Even if tech has lagged recently, Apple is often a beneficiary of risk-on sentiment, and modest gains there could outpace the S&P 500’s average if the index drifts sideways.

Why it might beat the S&P 500:
It’s a core market leader that often participates strongly in rallies—if tech turns positive, Apple could outperform.

📊 Summary Table

🚨 Important Considerations

• The next 4 weeks is a very short time horizon, and stock movements can be dominated by news and sentiment rather than fundamentals.

• Stocks with higher volatility can outperform (or underperform) significantly relative to an index like the S&P 500 over short windows, but they also carry higher risk.

• Past performance doesn’t guarantee future results.

If you’d like, I can also suggest lower-risk alternatives (like ETFs or sector plays) tailored to your goals and risk tolerance.

Response from Claude

Pick three stocks that you think will move higher (on a percentage basis) than the S&P 500 over the next four weeks. Give rationale for your picks.

⚠️ Important disclaimer first: This is not financial advice. I'm not a financial advisor, and short-term stock picking — especially over 4 weeks — is genuinely unpredictable. Even professional fund managers rarely beat the index consistently. Please don't make investment decisions based on this alone.

That said, here are three picks with concrete near-term catalysts in the next 4 weeks, based on current data:

1. Rhythm Pharmaceuticals (RYTM) The clearest binary catalyst on the board right now. The FDA is scheduled to announce its decision on approving Imcivree for acquired hypothalamic obesity by March 20, 2026 — squarely within the 4-week window. Positive news would likely cause shares to soar. NCHStats This is a high-risk/high-reward setup: biotech FDA decisions can go either way, but the trial data was favorable and the market hasn't fully priced in approval. If it passes, the move could be significant. If it doesn't, the downside is equally sharp — so position sizing matters.

2. Alphabet (GOOGL) A more defensive "outperformer" pick. Google Cloud's backlog soared 55% quarter over quarter and more than doubled year over year to $240 billion TRADING ECONOMICS, and as that converts to revenue, earnings should climb meaningfully. Alphabet has delivered strong gains over the last 12 months even with a recent pullback NCHStats, which creates a better entry point. With AI monetization through Gemini, Waymo's autonomous vehicle momentum, and strong cloud growth, it has multiple near-term tailwinds that should outpace a cautious broader market.

3. Norwegian Cruise Line (NCLH) The shortest-term catalyst of the three. Activist investor Elliott Investment Management recently disclosed a stake of more than 10% and launched a campaign demanding a board overhaul and operational reform, sending the stock soaring 12% in a single day. Statista Activist campaigns typically keep a stock elevated for weeks as the market prices in potential change — cost cuts, asset sales, or leadership changes. NCLH has been a chronic underperformer and Elliott's involvement could be the forcing function the stock has needed.

The honest caveat: RYTM is genuinely speculative (binary FDA event), GOOGL is the most "reasonable" conviction play, and NCLH is a momentum/event-driven bet. None of this accounts for macro shocks, tariff news, or Fed surprises that could move the whole market — which over just 4 weeks can easily swamp any stock-specific thesis.

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