How AI is Changing Investing — And What That Means for You

Good morning friends,

Today we’re tackling a massive and timely subject: can AI beat the stock market? And more importantly, what does AI mean for our jobs, our sense of meaning, and the way we interact with each other and the world?

While no one can predict the future with certainty, I’ve compiled my thoughts on this topic, drawing on both personal reflection and insights from leading thinkers in the space.

For those who love long-form exploration, I’ve written a more comprehensive article you can read here.

I hope this brings some clarity and perspective to a complex and rapidly evolving topic.

Enjoy!

Onward together,

Daniel

Can AI Beat the Stock Market?

Artificial intelligence is transforming investing. It can process earnings reports in milliseconds, digest macroeconomic data in real time, and detect patterns invisible to humans.

So naturally, the question arises: Can AI beat the stock market?

The short answer: yes — sometimes. But with limits. And those limits may actually make human judgment more valuable than ever.

The Present Reality

Even without AI, beating the market is extremely difficult. Only about 10% of fund managers consistently outperform broad U.S. equity benchmarks in the long-run.

Markets are largely efficient, and strategic asset allocation (think index funds) has become popular because it works over time. Dynamic or tactical approaches can add value, but they’re difficult to execute consistently. And so for the value they potentially add, they also add significantly more risk of underperformance.

Enter AI.

It increases speed, scale, and efficiency. In theory, it should push markets even closer to perfect efficiency — making value-added management (called “alpha”) harder to capture.

Yet human behavior keeps opportunity alive. People panic, overreact, and make irrational decisions. Even the smartest AI systems are competing in a market driven by humans — a market that is never fully rational.

The Limits of AI

AI can process vast amounts of data and optimize for defined objectives. But it cannot independently define its goals, interpret meaning, or be fully aware of unknown unknowns. system can verify its own completeness from within.

• Unknown unknowns exist.

• Discovery depends on awareness of gaps.

• Markets evolve in response to new information that was previously unimaginable.

Even the most advanced AI systems are constrained by their training data, their objectives, and their architectures. Human oversight is essential to prevent errors and systemic risk.

Competition and Human Growth

No matter how advanced AI becomes, it cannot eliminate competition. It can only transform it.

It may change the way we compete — from raw calculation to strategic oversight — but the need for competition remains. Competition sustains vigilance. Vigilance sharpens judgment. And that sharpening is what fuels personal growth, drives markets forward, and keeps humanity progressing.

Decentralized approaches — through multiple firms, independent research, or technologies like the blockchain — further protect markets from centralized failure. In other words: diversity, oversight, and human judgment remain essential.

Implications for Investing

So what does this mean for investors?

1. Active vs. Passive: Initially, AI could actually strengthen dynamic, active strategies. Firms that train AI models effectively can uncover inefficiencies faster and more consistently than human-only teams.

   Over time, however, if AI ever approaches a “singularity” where competing models converge and largely agree on valuations and risk, dynamic strategies may lose their edge. At that point, passive investing could gain relative appeal, not because AI eliminates alpha entirely, but because the value of individual active bets diminishes when market consensus is overwhelmingly uniform.

2. Financial Advisors: AI can handle routine tasks like reporting, optimization, and even scenario analysis, acting as a sophisticated member of an advisor’s “Master Mind” team. Yet it cannot replace the advisor’s final judgment.

   Humans provide behavioral guidance, perspective, and relational trust — insights that remain beyond the reach of algorithms. Advisors who integrate AI thoughtfully can become exponentially more effective, rather than obsolete.

3. The Market’s Future: Even in a world of highly advanced AI, investing continues to work. Companies grow, capital compounds, and ownership creates wealth. Alpha may shrink in some areas, but it will never disappear entirely — especially for investors who understand markets, human behavior, and the strategic deployment of AI. The fundamental mechanisms of economic value creation remain intact.

The Human Edge in an AI World

Even if AI reaches unprecedented sophistication, it cannot replace what makes us human. Work is not just about earning a living. It’s one of the most powerful ways we find meaning, serve others, and experience fulfillment. Even if there were no physical reason to work, there would always be a very real, even spiritual, reason.

Humans may respond in two ways. First, we may reject pure AI replacements for human roles because nothing can replicate the energy, mutual reciprocity, and presence of a fellow conscious being. People may naturally pay more for experiences and services delivered by humans simply for the connection, empathy, and creativity that AI cannot provide.

Second, humans may elevate their work to higher levels of thought, focusing more on creativity, insight, innovation and higher wisdom — the “right-brain” activities that machines struggle to replicate — while leaving routine analysis and optimization to AI. Even in investing, if a universal AI model perfectly interprets markets, the game changes but does not end. Rather than trying to outsmart the market, investors would focus on directing capital toward businesses, causes, and ideas that enhance the broader economy, creating value in ways that go far beyond mere financial return of specific industries or companies.

The Takeaway

AI will not replace investing. It will refine it. It will not eliminate human value, but it will amplify the premium on judgment, insight, and creativity.

The future belongs not to those who resist AI, nor to those who surrender entirely to it. It belongs to those who integrate technology thoughtfully, maintain human oversight, and use AI to strengthen human decision-making.

Markets evolve. Technology evolves. But the need for human insight, ethical awareness, and strategic thinking is timeless.

Daniel Lancaster, CFA

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