The stock market does not generally act as a mechanism to allow investors to funnel capital to companies. The stock market, as most people think about it, is really a secondary market for fractional ownership of companies.
The process by which that fractional ownership came to be owned by other people is the process by which companies are funded (companies go public and sell shares to the public. this is the major process by which the stock market helps companies raise capital (in exchange for equity)). So all the trading that happens intraday, or even holding some stock for years and years generally does not actually serve to invest in the company.
The question of whether this is a good thing is entirely orthogonal to the point of the article, which seems to be that reading news fast gives you information about markets.
While marketmaking is indeed a valuable market service as described by hugh3, the AI in question doesn't fill that role in any meaningful way (the AI stock picker seems to be a market taker -- it actually removes liquidity when it sees opportunities)
A defensible argument for algorithms like this is that they help maintain market efficiency/ensuring that risk in the marketplace is accurately priced (if such a thing is possible). The AI basically is incorporating news that the world knows and acting on it. If the AI didn't do it, then the markets would, but slower. The fact that its making money on 20 second timescales just means that its getting news 20 seconds faster than the rest of the market, which isn't particularly shocking because you might imagine that the rest of the world is responding without the benefit of an AI that reads/interprets articles in bulk.
The stock market does not generally act as a mechanism to allow investors to funnel capital to companies. The stock market, as most people think about it, is really a secondary market for fractional ownership of companies.
The process by which that fractional ownership came to be owned by other people is the process by which companies are funded (companies go public and sell shares to the public. this is the major process by which the stock market helps companies raise capital (in exchange for equity)). So all the trading that happens intraday, or even holding some stock for years and years generally does not actually serve to invest in the company.
The question of whether this is a good thing is entirely orthogonal to the point of the article, which seems to be that reading news fast gives you information about markets.
While marketmaking is indeed a valuable market service as described by hugh3, the AI in question doesn't fill that role in any meaningful way (the AI stock picker seems to be a market taker -- it actually removes liquidity when it sees opportunities)
A defensible argument for algorithms like this is that they help maintain market efficiency/ensuring that risk in the marketplace is accurately priced (if such a thing is possible). The AI basically is incorporating news that the world knows and acting on it. If the AI didn't do it, then the markets would, but slower. The fact that its making money on 20 second timescales just means that its getting news 20 seconds faster than the rest of the market, which isn't particularly shocking because you might imagine that the rest of the world is responding without the benefit of an AI that reads/interprets articles in bulk.