(Photo by Michael Lawrence/Getty Images for Morgan Stanley)
Getty Images for Morgan Stanley
- Morgan Stanley has unveiled its new internal AI model for research operations
- AI model built on ChatGPIT software, OpenAI released an enterprise tier in August
- Morgan Stanley’s share price rose 0.4% on Monday
Are banking giants now tech companies? This is the latest question we look at after Morgan Stanley confirmed it will launch an internal AI assistant based on OpenAI technology. This is the first step towards launching custom AI models, although giants like JP Morgan, Citigroup and Goldman Sachs are excited about this matter.
This move is likely the first of many we will see from big banks as the opportunities for generic AI continue to grow, with some seriously big moves being made by firms researching the potential value it could add to the banking industry. Have been.
Let’s take a closer look at what Morgan Stanley has created and how the market is reacting to the news.
What is Morgan Stanley’s AI play?
Banking giant Morgan Stanley is officially getting in on the generative AI hype with a new artificial intelligence-powered assistant. With the catchy name ‘AI@Morgan Stanley Assistant’, the new tool is designed for its financial advisors and support staff to access over 100,000 research reports and documents.
The AI program aims to save staff time on administrative and research tasks related to questions about the markets, internal processes and recommendations so advisors can focus more on their client base.
The new technology is built on OpenAI’s GPT-4 software, which first announced in March that it was working on an AI assistant with the new technology. JPMorgan and Goldman Sachs also have similar projects, but Morgan Stanley is the first to come out with an internal customized AI program.
In a memo to staff first reported by CNBC, Morgan Stanley co-chairman Andy Saperstein said the new tool will “revolutionize client interactions, bring new efficiencies to advisory practices, and ultimately free up time to do what you want.” Will help you do what you do best: serving your “customer.”
Morgan Stanley plans even more AI tools, including running a pilot on an AI program called Debrief that automatically summarizes client meetings and generates follow-up emails.
Has the enterprise level of OpenAI been successful?
Morgan Stanley is one of several companies that has been an early tester of OpenAI’s specialized AI programs, with the AI start-up launching a separate enterprise tier for businesses in August.
The new tier is designed for businesses of various sizes and industries and includes access to GPT-4 with no usage limits, faster performance, and API credits. Pricing levels vary according to the size and needs of the enterprise customer. OpenAI confirmed that several companies, including Block, Canva, and Duolingo, were part of the beta process.
The most significant difference with the enterprise tier is that OpenAI’s model is not trained on data submitted by the company. In a blog post, OpenAI confirmed, “We do not train on your business data or conversations, and our models do not learn from your use”. Instead, ChatGPT can be used by customers to train their own custom models for customer service. , research and administrative work use cases as some examples.
However, there are still risks to the new enterprise model. It is unclear what training dataset is used to train ChatGPT-4 and whether its use may involve copyrighted material. Hallucinations, where the AI model gets confused and confuses the facts, are also a concern.
Are other banks considering generative AI?
It is fair to say that the opportunity for banking and generic AI to partner together is huge. JPMorgan confirmed in May that it wanted to develop a ChatGPT-like AI model to choose investments for clients. The banking titan is also investing $1 billion in AI and data analytics by 2023, with a view to investing the same or more every year.
This is nothing compared to the potential return on investment. JPMorgan estimates its real value to be $1.5 billion in 2023 alone, while McKinsey estimates AI could create $1 trillion of additional value every year for the global banking sector.
Citigroup also recently unveiled its AI plans, with CEO Jane Fraser confirming that the bank has been working on generative AI models for the past three years. Fraser commented in his LinkedIn post that “the risks of not adopting generative AI far outweigh the risks of engaging with it.” Citi, along with JP Morgan and Goldman Sachs, had banned ChatGPT from their trading floors until a full risk assessment was completed.
The Evident AI Index ranks the top 23 banks in North America and Europe based on how well they are prepared for the coming AI revolution, with JPMorgan taking the top spot by some distance. Based on talent, innovation, leadership and transparency, US banks are ahead of their European counterparts and occupy seven of the top 10 positions. Morgan Stanley ranked tenth in the index.
What else is happening with Morgan Stanley?
The AI news coincides with the announcement on Monday that Morgan Stanley is being sued for at least $750 million by private equity firms who claim they were defrauded into a bad high-speed rail company investment.
Subsidiaries of Certerus Management and Knighthead Capital Management have sued Morgan Stanley for breach of contract and fraud, alleging the firm improperly restructured a deal involving their investment in debt to Brightline Holdings.
Brightline Holdings, also a defendant in the case and backed by private equity firm Fortress, operates the Florida rail system and plans to develop more railway lines between L.A. and Las Vegas.
The plaintiffs said Morgan Stanley persuaded them to invest $281 million, but concealed information about the Brightline preferred share deal, which required the loan to be repaid in the “entire” amount of approximately $750 million. The bank is also accused of making fake documents.
“The firm does not believe the claims have merit and will vigorously defend itself,” Morgan Stanley said in a statement.
What was the market reaction?
Morgan Stanley’s share price closed 0.4% higher on Monday, likely driven by the AI news. In some good news following the litigation, the stock rose 0.12% in premarket trading on Tuesday.
The bank’s share price has gained 3.49% since the start of the year as banking sector shares struggled to recover from the tumultuous banking crisis that hit in March. In comparison, rival JPMorgan saw its stock rise 10.36%, but Goldman Sachs declined 0.8% and Citigroup lost 6.8% in value. The SPDR S&P Bank ETF is seen losing more than 16% in value in 2023.
Morgan Stanley has been the first to rise to the challenge and introduce a fully operational, internal AI model to make the lives of financial advisors and employees easier. We can imagine that other top banks will soon want to copy the success with their own AI models.
As far as Morgan Stanley is concerned, the bank’s share price saw a slight rise on Monday as a result. The interesting thing about AI in banking is that the potential value pointed out by McKinsey is huge – which is why so many banks are looking to hop on the generative AI bandwagon. In view of this, a flurry of AI announcements related to banking is expected.