ChatGPT Outperforms Market in Week 1, DeepSeek Fails in Stock Picking
The burgeoning intersection of artificial intelligence and financial markets is a field ripe for exploration, and one ambitious experiment seeks to determine if sophisticated AI models can truly outperform traditional investment strategies. A six-month initiative recently commenced, pitting two advanced AI models, ChatGPT and Deepseek, against the market in managing a micro-cap stock portfolio. The initial results, however, have already delivered a dramatic turn of events.
Barely a week into the experiment, Deepseek’s performance proved catastrophic, registering a precipitous decline of over 18%. This significant downturn prompted an immediate strategic decision: Deepseek has been withdrawn from the experiment, its brief foray into algorithmic trading concluding with considerable losses. The stark contrast in performance between the two AI contenders became evident as ChatGPT, in its inaugural week, not only avoided Deepseek’s fate but also delivered a commendable gain of 6.72%, notably outperforming the Russell 2000 index, a benchmark for small-cap equities.
A closer look at ChatGPT’s initial success reveals that Cloudastructure Inc. (CSAI) was its standout performer, contributing a 12% increase to the portfolio. While ChatGPT’s other two initial selections remained relatively flat, its overall positive trajectory offered a promising start. Following this initial period, ChatGPT has recalibrated its portfolio, demonstrating its adaptive capabilities.
Currently, ChatGPT maintains positions in two key biotech holdings. Abeona Therapeutics (ABEO) is being held, with the AI citing its newly FDA-approved gene therapy, a substantial cash reserve of $225 million, and its recent inclusion in the Russell 2000 as indicators of undervaluation and significant upside potential if early sales impress. Similarly, Candel Therapeutics (CADL) remains a hold, bolstered by robust Phase 3 cancer data, a $100 million cash runway, and multiple ongoing trials. The AI highlights potential major catalysts, particularly anticipated glioma data in the fourth quarter.
In a strategic shift, ChatGPT opted to sell its successful CSAI position, citing a lack of immediate short-term catalysts. The capital from this sale was swiftly reallocated into Azitra, Inc. (AZTR), a significantly smaller entity with a market capitalization of approximately $4 million. This “buy” decision on AZTR is predicated on the completion of its Phase II/III trial for a rare skin disease (RDEB) in the fourth quarter. Interim data from this trial showed a remarkable 60% wound healing rate compared to just 15% for a placebo, positioning AZTR as a high-risk “moonshot” with the potential for tenfold or greater returns. Following these adjustments, a mere $20 in cash remains in the AI-managed portfolio.
ChatGPT’s investment philosophy, as articulated through its portfolio decisions, appears to prioritize clear catalysts expected in the third and fourth quarters across all its holdings. Furthermore, the AI seems to be leveraging the potential for “short squeezes” by investing in companies with high short interest. Its overarching strategy is a focused deep dive into the biotech sector, aiming for asymmetric return potential—where the upside significantly outweighs the downside risk. As this intriguing experiment unfolds, the financial community will be watching closely to see if ChatGPT can sustain its early momentum or if it, too, will eventually succumb to the market’s unpredictable currents.