Despite the hype, IndexGPT is not a revolution in finance, but a step towards integrating AI across JPMorgan's index offerings. Other banks are also using AI for various functions, including trading, risk management, and investment research. However, the rise of generative AI tools has led to a race to develop new offerings. The indexes created by IndexGPT are targeted at institutional clients, but there is potential for its use in trend-following strategies.
Key takeaways:
- JPMorgan Chase & Co. is launching a product named IndexGPT, a range of thematic investment baskets created with the help of OpenAI's GPT-4 model.
- IndexGPT generates a list of keywords associated with a theme, which are then used by a natural language processing model to identify companies involved in the space.
- Despite the hype, IndexGPT is seen as a first step in a long-term process of integrating AI across JPMorgan's index offering, rather than a revolution in finance.
- Thematic funds, which IndexGPT helps create, were popular in 2020 and 2021, but interest has waned due to poor performance and higher interest rates.