AI can be an excellent tool to quickly learn about a company but it won’t replace fundamental analysis
You might as well face it: Artificial intelligence (AI) is coming at you, whether you are ready for it or not. In the investment world, we have had “robo-brokers” for some time now. But with AI advancements, it is becoming much easier to screen stock ideas and learn about companies.
At 5i Research, we are using AI much more often, for basic as well as complex tasks. It can be a great complement to our data feeds from companies such as Bloomberg LP and Refinitiv Ltd. AI can be an excellent tool to quickly learn about a company but it won’t replace fundamental analysis. The investment world is still very much an art as well as science. For instance, AI is not likely to be too helpful in capturing sudden investment sentiment changes. Also, AI chatbots are currently known to hallucinate facts, misinterpret data, not be up to date and jump to conclusions, so cross-referencing with legitimate sources of information is critical.
Let’s look at five prompts you can use in your AI chatbot in order to better understand companies. In each case, we will run a well-known public company through the test and give you a brief summary of what the robot had to say, as well as our assessment of its response. While there are several chatbots available, we used Perplexity AI Inc.’s.
What are the red flags of this company as a possible investment?
Many investors ignore investment risks. But there are always risks. Investors can prompt AI to highlight controversies, red flags, a short sell thesis, executive misbehaviour and past failures. We ran Alphabet Inc. (GOOG) through this prompt and got this response (summarized): “GOOG has a heavy dependence on advertising (Search, YouTube, Network), meaning revenues are tied to macro cycles and ad budgets; advertising still represents the large majority of Alphabet’s total revenue mix. A downturn in digital ad spending, increased ad blocking or shifts toward competing platforms (e.g. TikTok Inc., Amazon.com Inc. ads) could pressure both growth and margins despite diversification into cloud and other bets.” This information seems to us as accurate, though not exactly new information.
What is this company’s competitive moat and competitive threats?
Like an MBA course, this AI prompt is designed to provide you with the company’s strengths and weaknesses, and opportunities. We ran Shopify Inc. through the chatbot and got this: “Shopify’s moat is built around an integrated commerce platform with high switching costs, strong brand and a large partner ecosystem, but it faces intense competition from other e‑commerce platforms and large marketplaces, and regulatory and macro risks. For an investor the moat is real but not unassailable, and it must be defended with ongoing product innovation and ecosystem investment.” This answer makes sense, and the point about Shopify needing to defend its turf is a valid one, and a risk if it fails in this task.
What is the outlook for the industry this company is in?
With this prompt we are looking at growth drivers, concerns, cyclical worries and risks. We used Cameco Corp. for this prompt and AI told us this: “Cameco operates in the uranium mining and nuclear fuel industry, where the medium‑ to long‑term outlook is structurally positive, driven by growing global nuclear capacity and an emerging uranium supply deficit. Global nuclear capacity is projected to rise from about 395 GW in 2024 to roughly 494 GW by 2035 as countries seek low‑carbon dispatchable power and energy security.” This response is accurate, but again not exactly revealing much that a basic review of the sector wouldn’t come up with.
What are the financials of this company like?
We would take results from this prompt with a grain of salt. This is one area where you don’t want the robots guessing, or hallucinating. Nothing, we think, is going to beat cold, hard analysis of a company’s financials, including reading all of the financial notes. Still, this prompt can help set the tone for further analysis. We used Coreweave Inc. for this prompt, as many investors have expressed concern about the company’s debt levels. AI told us this: “Free cash flow is sharply negative, with a free‑cash‑flow margin worse than negative 300 per cent, reflecting heavy investment in data centres and hardware plus working‑capital build. Interest expense is substantial, approaching US$1 billion (US$990 million in the first three quarters of 2025).” The AI bot we think nailed its response on Coreweave. Outlining the significant financial risk is a key point, especially for investors who may be late to the AI/datacentre party.
What is the sensitivity of the company to external factors such as interest rates, inflation, regulation, oil prices and so on?
This prompt helps investors ascertain risks that may not be so noticeable when looking at the company itself. Often, investors will find a great company but it is the wrong time for that industry. This prompt at least will outline a company’s overall sensitivity to various factors. For this prompt, we chose Canadian National Railway Co. (CN Rail) as our test subject: “CN Rail shows high sensitivity to macroeconomic factors due to its reliance on freight volumes tied to industrial activity, trade and commodities. External pressures such as interest rates, inflation, regulation and oil prices directly influence its operations, costs and financial performance.” This response is fine, but anyone with a basic knowledge of the rail industry is not going to get much new here.
There are dozens of prompts you could use to investigate a possible investment. These are just a sampling but show how AI can be a useful tool in analyzing a company. We would keep in mind, of course, that everyone has access to this information, and every single trade, ever, has had an equal and opposing viewpoint. But since most individual investors do very little actual research we think AI can certainly help, at least in letting investors know what they might be getting into.
Unlock the Power of Informed Investing with 5i Research!
DIY investing doesn't have to mean going it alone. At 5i Research, we're your trusted partner in navigating the stock market. Our platform offers comprehensive stock and market research, empowering you to make smart investment decisions.
- Investor Q&A: Have burning questions? Get answers from our team of experts and fellow investors in our dedicated Q&A section.
- Research Reports: With over 60 meticulously researched Canadian stocks, our reports offer in-depth analysis, giving you the confidence to invest wisely.
- Model Portfolios, Alerts, Forums, Portfolio Tracking, and Much More.
Take Care,
Comments
Login to post a comment.