One Monday morning in May, there was a sudden drop in the US financial markets. A photo of an explosion at the Pentagon near Washington DC was circulating on social media and popular investment websites.
Was it an attack? Investors seemed to think so. Stocks tend to do poorly in the early stages of international conflict. The S&P 500 declined 0.3% — a session low — and safe havens such as gold and Treasury bonds began climbing.
But within two hours everything became normal. Experts said that the image was fake, it was likely generated by artificial intelligence (AI).
But as that flash of investor nervousness raises questions about what AI means for market stability, the simulated images become ever more realistic — and always easier to come by.
Algorithmic trading may fall prey to AI fakes
There is no shortage of concern about the dangers of the AI boom. Disinformation, deepfakes and the extinction of the human race are just some of the concerns that have crept into the public debate around the technology. Last month, Gary Gensler, head of the US Securities and Exchange Commission (SEC), said the technology could pose a “systemic risk” capable of triggering the next financial crisis. He and others are especially wary of the fallout from what is known as generative AI. Generative AI, which includes ChatGPT, can generate complex text, sounds, and images like the Pentagon.
Regulators in the United States and the European Union are currently working on regulation of the technology. When it comes to the issue of fake images, unless there is an easy way to spot fakes, the more realistic and more common they are, the greater the danger they can pose to financial markets.
According to Adam Kobeissi, editor-in-chief of industry publication The Kobeissi Letter, that’s because market movements are becoming more reactive to major breaking news.
“A lot of these moves are happening because of high-frequency trading, algorithmic trading,” he told The Associated Press. “That’s basically gathering headlines, synthesizing them and then breaking them down into a trade on a millisecond basis.”
Algorithmic trading is a type of automated trading that is performed by a computer using algorithms that have been trained to recognize past patterns and trade based on those patterns.
“It’s basically like you’re pulling the trigger every time a title comes out,” he said.
Fact Check: How to identify AI images?
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Internet intensifies already existing behaviors
But Nir Vulkan, professor of business economics at the University of Oxford, says this kind of business practice is nothing new. The markets have always reacted to rumors and misinformation, but they usually correct themselves once the truth is out.
“With the internet and everything connected, it’s faster and probably stronger,” he told DW, “but then it corrects itself.”
Unlike Kobesi, he is not convinced that algorithmic trading in response to the spread of fake images will be the main cause of volatility. the reason? Low frequency algorithmic trading.
While high-frequency trades are only held for a few seconds, low-frequency trading will hold positions for much longer periods of time, perhaps weeks.
It is the latter that is favored by hedge funds. Since high-frequency algorithms are taking advantage of very short-term opportunities, the amount of capital available to trade with them is much smaller than for low-frequency trading.
“The big money is almost all in the low frequency,” Vulcan said.
AIImage: Tech-heavy NASDAX index jumps as company invests in STRF/STAR MAX/IPx/Picture Alliance
Algorithms may be less vulnerable than humans
He said the algorithms used by most hedge funds that he knows won’t panic when they see short-term moves like what happened after images of the Pentagon attack spread. By the end of the day, these algorithms will not be affected by when the gait is automatically corrected.
“So you could say it’s fantastic,” he said. “These algorithms are better at responding to short-lived spurious events than people.”
That said, it will be very difficult to make money from these types of short term reactions, unless you know it is happening, or are about to do it. And it’s already illegal.
But if fake images become more common, could we see a lot of volatility in the market in the near term?
Vulcan said, “I don’t know that this is an algorithmic question.” “It’s more a question about the robustness of fake news in general.”
Artificial Intelligence: Will Humanoid Robots Replace Us?
Robots equipped with Artificial Intelligence (AI) are taking over more and more work from humans. What are human machines capable of doing – and will they soon replace us?
Image: Stringer/AA/Picture Alliance
Hong Kong-based Hanson Robotics Company develops human-like robots and is known for its robotics and AI technology. One of the machines is called “Professor Einstein”, named after the famous physicist. It aims to make Einstein’s wisdom and humor accessible to a new generation.
Image: Stringer/AA/Picture Alliance
as human as possible
To make the robot as human-like as possible, a nano-technology skin called Fruber is used in the manufacturing process. The aim is to create androids that display realistic facial expressions. In the future, the company also wants to give its robots human capabilities like love and compassion.
Image: Stringer/AA/Picture Alliance
“Sofia:” Citizen and Ambassador
The company has been making humanoid robots since 2007 and within 10 years made a coup with its model “Sophia”. She is the first and so far the only robot to have her own citizenship. After his presentation, Saudi Arabia made Android its citizen. “Sofia” also serves as an “Innovation Ambassador” for the United Nations.
Picture: Isaac Lawrence/AFP/Getty Images
From Dishwasher to Astronaut
The robot “BioMany” is an all-purpose robot that, according to its American manufacturer Beyond Imagination, can be used in a variety of ways: “BioMany” is capable of opening bottles as well as injecting and thus can be used for gastronomic purposes. can be done in and medical field. And traveling to space is also believed to help in space construction.
art created by artificial intelligence
Humanoid robots not only perform practical functions, they can also be artistic as in the case of the “Aye-Da Robot”. Engineered Arts’ humanoid robot is an AI artist with a humanoid face and robotic arms. Developed in 2019, “Ai-Da” is the world’s first robotic art system. With the help of algorithms, it creates drawings, paintings and sculptures.
Image: Avalon/Photoshot/Picture Alliance
It’s a strange image when Japanese roboticist Hiroshi Ishiguro stands next to his robot “Geminoid”, which looks like its twin brother. Ishiguro is considered the pop star of Japanese robotics research and has also created an android clone for Taro Kono, Japan’s minister of digital transformation. Ishiguro’s own robot is on a lecture tour in America – without its creator.
Image: Naoki Maeda/AP Photo/Picture Alliance
Humanoid robots are also being developed in Germany: In the fall of 2022, “Lena” completed a test run in the office. The artificial intelligence-powered robot woman from the Leap in Time Lab research laboratory worked alongside human colleagues for eight weeks. At the end of the testing phase, Lena had expanded her vocabulary to such an extent that she was able to give presentations.
Image: Boris Rösler/dpa/picture-alliance
‘Godfather of AI’ warns of dangers
The more tasks that are performed by artificial intelligence, the more there is talk about the ethical dimension of this development. Geoffrey Hinton, known as the “Godfather of AI”, fears losing control of AI and warns of “serious risks to humanity”. Many soon “will not recognize the truth,” he says. Hinton has recently resigned from Google.
Image: Masahiro Sugimoto / AP Images / Picture Alliance
AI tech stock pile-in is also a risk
For now, the bigger risk to the markets may not be traders, human or otherwise, falling for AI-generated images. Some people think that there is too much faith in the technology itself.
Growing interest in AI has drawn many investors into tech stocks in recent months. For some experts, this is too much.
“The AI revolution is very real, very important,” Julian Emanuel of investment advisory firm Evercore ISI said on CNBC in May. “But … these things open in waves. And, you get a little bit of excitement and the shares sell off.”
JPMorgan strategists led by Dubravko Lakos-Bujas said in a note to investors in April that the current degree of congestion means “recession risks are far outweighed by price.”
Both experts are concerned that these index gains are highly concentrated in stocks of tech companies such as Microsoft, Alphabet, Amazon, Apple, Meta, and Nvidia. Currently, nearly half the value of the tech-heavy NASDAQ index is concentrated in these six companies. If sentiment turns away from AI – or from technology in general, as happened after central banks started raising interest rates – an overall market rally could end.
Edited by: Uwe Heussler