Intelligent Alpha builds portfolios by relying on AI investment picks.
The firm relies on a trio of AIs — ChatGPT, Claude and Gemini — and implements their decisions, even if they sound counter-intuitive.
The models have a great track record so far.
There’s a $30 million fund that, for all intents and purposes, leaves all investment decisions to be made by artificial intelligence (AI).
The firm’s name: Intelligent Alpha. Its staff includes founder and CEO Doug Clinton, a few programmers and contractors, and a trio of AIs — OpenAI’s ChatGPT, Google’s Gemini and Anthropic’s Claude.
The AI triumvirate makes up the firm’s investment committee and so far, it’s doing a stellar job.
“Some of the AI’s best calls have been shorts,” Clinton told CoinDesk in an interview. “It was short on Boeing earlier this year, before that door blew off the 737 MAX [in January]. And AI was actually short on the stock for that reason — because it thought there would be quality issues with the plane.”
While the firm has focused on traditional finance so far and mostly kept away from crypto, Clinton said he started experimenting with bitcoin (BTC) specifically in the last five months. The objective: for AI to set useful targets to trade the world’s top cryptocurrency.
“In the bull case — which was a Trump win and a more favorable regulatory environment — AI saw that bitcoin could maybe go to $140,000,” Clinton said. “Maybe that’s the scenario we’re working toward right now.”
How it works
A lot of firms now use AI to enhance human processes, to help analysts process data and think in different ways. But Clinton’s method is to give responsibility to the AI trio, and stay out of its way as much as possible when it comes to investment decisions.
The process is relatively simple. If, for example, Intelligent Alpha is looking to build a large cap U.S. equity portfolio, the fund will curate a bunch of data about U.S. companies with large market capitalizations, like historical revenue and earning projections, and feed it to the AIs.
The next step is to give a philosophical framework for the AIs to use. Clinton asks the AIs to step into the shoes of some of the most famous investors in the world — Warren Buffett, Stanley Druckenmiller, Cathie Wood — and apply their way of thinking to the portfolio at hand.
The triumvirate then produces a portfolio, which a human must double-check to make sure there aren’t any “hallucinations,” in Clinton’s words. For example, the AI may accidentally include a stock that was recently acquired, or the stock of a company with a small market cap.
“Other than that, we try not to really mess with the portfolios,” Clinton told CoinDesk. “As a human, I’ll sometimes look at the portfolios and think ‘Oh, this pick seems like a terrible idea.’ Other times I’ll see something really interesting and try to understand the logic. It’s kind of fun.”
The process involves the three AIs explaining their reasoning to Clinton. Not only does it help him ascertain that the investments are aligned with the portfolio’s goals, but he says that models provide better portfolios when they’re forced to explain why they like specific stocks.
It often happens for the AIs to disagree. And their way of thinking changes as updates get rolled out. “It used to be the case that Claude was the most contrarian model in terms of the outputs, when we first started testing,” Clinton said. “Now I would say it’s ChatGPT.” And while Clinton has tested other AIs such as Grok or Lama AI, keeping the investment committee down to three AIs has proved to be the most efficient set-up.
Predicting the future
Investors can gain exposure to Intelligent Alpha’s strategy through an exchange-traded fund, the Intelligent Livermore ETF, which launched in September and uses AI to build a global equity portfolio. More such funds are on the way, Clinton said.
For the Livermore ETF, every financial quarter the models review world events and try to make predictions for the next three to six months. Five or six areas of opportunities are then identified (following the investment philosophies of the greats like Druckenmiller) and the portfolio gets built around these sectors.
Having competing philosophies means the portfolio usually ends up being quite balanced. “In many cases they’re looking at idiosyncratic opportunities,” Clinton said. “We haven’t seen big issues where [the investment philosophies] are at odds, but even then, it would be like hedging.” The AIs themselves make the decisions on how to weigh the various philosophies found in the portfolio, depending on the areas they’re the most confident in.
“AI has been, at least so far, really good at seeing forward,” Clinton said. “Right before we launched, it made a big bet on Asian stocks, specifically Chinese stocks, and that was right before [billionaire hedge fund manager] David Tepper went on CNBC in September and said that China was his biggest bet, that they were bringing out the bazooka for stimulus. And you know, Chinese stocks went crazy.”
Another memorable trade: chipmaker giant Nvidia has been AI’s top pick since the experiment began in summer of 2023. “Back then, I was like, ‘Oh, my God.’ Nvidia had run so much at that point,” Clinton said. “But it’s up now like 400% from the moment the AI picked it.” The lesson in there, he says, is humans will react to charts emotionally, whereas AI “just doesn’t care. It says ‘No, this is going to go higher.’”
Not that every bet has been a slam dunk, but so far, the mistakes have been on the margin, according to Clinton. The AI is building a good track record on macro events especially, he said. For one thing, it predicted that former President Donald Trump would be re-elected.
And crypto?
One of the reasons Intelligent Alpha doesn’t focus too much on crypto is simply lack of data. Their trades may have happened on-chain, but there’s no easy way to go back and find the kind of trading setups and investment philosophies used by famous crypto investors like Cobie or GCR. Most of the time, all you can do is go off of their posts on X — and it’s hard to know whether the posts reflect reality.
That being said, the crypto community’s reliance on X means that Grok could end up playing a role in Intelligent Alpha’s triumvirate someday for crypto purposes, Clinton mused, since that model is trained and fine-tuned with data from the social media platform.
“The question that we’re exploring here is, what can we do with AI that would maybe be unique and different and stand out a little bit,” Clinton said. “To find a unique way to use AI to identify breakout crypto projects, that would be a really cool way to use the tech.”
