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Artificial intelligence (AI), like many other sectors, has influenced the world of investing, helping traders and investors with data crunching and strategy development. However, can they help make money from trading and generate alpha?

Zerodha founder and CEO Nithin Kamath believes that while AI is an edge, it is just a different kind of edge. AI can make investors more disciplined, but not smarter.

In a post on the social media platform X, Kamath shared that AI cannot help make money from trading as long as a human is in the loop.

"As long as there's a human in the loop, you're still dealing with the same creature driven by fear and greed, and that human will keep making the same mistakes," Kamath explained.

Besides, there may not be a significant informational edge left in markets because they are largely priced in.

"People making consistent money in markets are high-frequency trading firms, market makers, prop desks, etc. that have built infrastructural and data moats over the years, with significant investment of time and capital. Those are real edges," said Kamath.

AI, Kamath explained in his post, is a tool to help investors behave better in times of panic, not to generate alpha.

"What it can do is help you build and test strategies, then execute them systematically, removing emotion from the equation. That means fewer panic sells, less revenge trading, and more consistency. What it can't do is turn a bad strategy into a good one or create a magic money tree," Kamath wrote.

Kamath underscored that AI can make investors more disciplined, but not smarter.

Kamath's social media post attracted over 100 comments from traders, investors, AI engineers, and others. Many of them agree that AI can't beat the market, which is driven by human biases.

Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.Nishant is a market reporter at Mint, where he holds the official designation of Principal Correspondent – Markets. He has been closely tracking the Indian stock market as well as major global stock markets along with the broader macroeconomic trends for a decade.

He is obsessed with breaking down complex financial and economic concepts into clear and engaging stories. He focuses not only on what is happening in the markets, but also why it matters.

His coverage includes stock market trends, sector rotations, monetary and fiscal policy developments, inflation, growth data, and personal finance strategies.

With nearly 10 years of experience in covering financial markets, Nishant has covered bull markets, corrections, policy transitions, and macro developments that has equipped him with a deep understanding of how domestic and global forces shape markets and affect investments.

He regularly interviews market veterans, fund managers, economists, policymakers, and corporate leaders to provide readers with a 360-degree view of market dynamics and the broader economic landscape.

Before joining Mint, Nishant worked with some of India’s most respected business newsrooms, including The Economic Times and Moneycontrol, where he reported extensively on the stock market, corporate earnings, macroeconomic trends, GDP, inflation, monetary policies of the RBI and the US Federal Reserve, bonds, and currencies.

Apart from economics and investing, he has interests in geopolitics and emerging technologies, such as AI.

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