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Choosing the right growth stock is never easy. Especially if you’re a flawed, fallible human being like me.
But what if your intelligence is all artificial? Does that give you an edge? I decided to find out by asking ChatGPT to name the very best FTSE 100 growth stock to buy right now.
The generative artificial intelligence chatbot was clearly (and rightly) suspicious of my question. It informed me: “The ‘best’ growth stock among the FTSE 100 will ultimately depend on your investment criteria, such as your risk tolerance, investment horizon, and sector preferences.”
This is sound advice. It makes me wonder which website ChatGPT has been perusing!
AI loves this high-flying FTSE 100 share
My new chatbot buddy then misunderstood my question by giving me a list of five FTSE 100 growth stocks, rather than just one. In alphabetical order these were budget airline easyJet, gold producer Fresnillo, trainer retailer JD Sports Fashion, British Airways owner International Consolidated Airlines Group and aircraft engine maker Rolls-Royce Holdings (LSE: RR).
Like any newbie investor ChatGPT has a bias towards past performance, with IAG and Rolls-Royce almost doubling in value. Yet that’s not its only criteria. JD Sports actually fell 40% over the last year.
I politely asked my AI bro’ to boil down its choice to just one stock and wasn’t surprised to see it plump for Rolls-Royce. That’s been the UK’s stand-out blue-chip lately. Its shares are up 98% over one year and a staggering 490% over two.
ChatGPT praised the significant transformation under its new leadership. “Its restructuring efforts, cost-cutting measures, and focus on profitability have reignited investor confidence,” it informed me.
It also highlighted the group’s “dominant position in the aerospace and defence sector, with its jet engine business benefiting from a rebound in global air travel and increased defence spending”. I’ve got no beef with that.
It added that Rolls-Royce has overcome years of challenges to deliver consistent earnings growth, which it expects to continue.
I’ll stick to my own intelligence, thanks
It added a note of caution, warning that the Rolls-Royce share price recovery “depends on sustained improvements in global travel and effective execution of its strategic goals”. It wisely added that the shares “can experience high volatility”.
Sadly, I don’t think AI has given me an edge here. The advice is too general, and misses one big issue. Rolls-Royce shares are super-expensive trading at more than 40 times earnings.
I think its fake brain also misses out the human factor. Investor expectations are now dizzyingly high, leaving the stock vulnerable to the slightest earnings miss.
ChatGPT and I share one fundamental flaw. Neither of us can see the future. So I’m guessing when I say Rolls-Royce shares will lose their va-va-voom. This was the best growth stock on the FTSE 100, but I don’t think it is today. I’m not selling my stake but if I had £1k to spare, I’d stick it in JD Sports instead.
Personally, I think that’s today’s best FTSE 100 growth opportunity, as it’s due a monster recovery at some point. But I’m only human.
