Hi, I'm Matt. Welcome back to AI Street, your weekly brief on AI + finance. Here’s the latest:

The Rundown 

• Big Picture: Overhyped AI Doomsday

• Five Minutes with Finster CEO

• Bank AI Updates

• Trading firm with all the AI Chips

• AI Street Podcast

• Italian AI firm Axyon fundraising

• Matt in New York 🗽 

BIG PICTURE
Even AI Doomsday Is Overhyped

For those of you worried that your new boss will be some AI overlord, fear not:

“This AI Pioneer Thinks AI Is Dumber Than a Cat”

That’s a headline from the WSJ about Yann LeCun, Chief AI Scientist at Meta, and the “AI boom’s best-credentialed skeptic.”

Similarly, Apple scientists came out with a report this week also questioning the tech’s “intelligence.” While LLMs can mimic logical reasoning, they don’t really understand mathematics, per the study. AI can get tripped up when problems contain irrelevant information. Like this Kiwi example:

Whether or not AI is actually reasoning, I think, is less important to actual business outcomes.

As long as AI works for a particular use case, I’m not sure folks are going to get super hung up about how it works. Like I know GPS uses satellites — and that’s about it — but I don’t question its usefulness.

INTERVIEW
Five Minutes with Sid Jayakumar

This week, we interview Sid Jayakumar, CEO and founder of London-based Finster AI and formerly a research engineer at Google DeepMind.

Before joining DeepMind, he turned down a lucrative job offer to work at a quant hedge fund, leaving his would-be employer perplexed — considering they offered free housing in London. Sid returned to financial markets by founding Finster last year.

The company is building AI agents to make financial analysis more efficient. Finster AI is currently working across use cases on the buy side and investment banking with firms managing over $800 billion and collectively employing over 1,000 analysts, according to Sid.

The company is backed by Hoxton Ventures with angel investors including the CEO and CTO of Cohere, senior members at OpenAI, Meta AI, and DeepMind.

In the interview, we cover:

• How Finster is tackling the AI "hallucination" problem that's driving finance pros crazy

• His prediction on how AI will reshape hedge funds (spoiler: it's sooner than you think)

• Why general-purpose language models fall short for specific financial applications

• The potential for AI to automate complex financial tasks beyond simple data retrieval

• And more

This interview has been edited for clarity and length.

How do you see AI impacting hedge funds in the coming years?

There's already pressure on the 2-and-20 world to go to 1-and-20 or lower. With AI, I think that will continue. The best performing people in all fields, but especially in finance, will find that AI aligns with their incentives. You could imagine a new, savvy hedge fund saying, "We don't have any juniors. We just have AI assistants and 3 partners. We're really lean, we take very low management fees, but we take our cut of the carry because we back ourselves to generate returns."

….

How soon do you think we'll see these changes in the industry?

Some of this is already happening. From what I hear, there's a lot of money being made with interesting applications of large language model-based technology in quantitative prop trading. But for the broader industry shift we're talking about for the “fundamental” world, I'd say we're looking at the next 5-10 years. It's not an overnight change, but it's coming faster than many people realize.

Read the full interview here

BANK AI UPDATES

The biggest U.S. banks reported better-than-forecast third-quarter results, but few had updates on their AI progress outside of Morgan Stanley and Bank of America.

• Morgan Stanley CFO Sharon Yeshaya highlighted how the bank is using AI to match clients with financial advisors, leading to 100,000 successful matches year to date.

• Bank of America CEO Brian Moynihan highlighted that its AI-enabled virtual assistant, Erica, has reached 2.4 billion client interactions since its launch.

Thanks to Alex Hoffman, CEO and cofounder at Marvin Labs, for this breakdown.

High-Frequency Trading
The Trading Firm with All the AI Chips

Alex Gerko, the CEO and founder of proprietary trading firm XTX Markets, is sitting on one of the largest piles of AI chips in the world.

The Russian-born mathematician founded the firm in 2015, transforming it from a startup into one of Britain's most profitable private companies and a global powerhouse in algorithmic trading.

The firm's success stems from its focus on data analysis rather than pure speed, setting it apart from traditional high-frequency trading firms, per the Financial Times.

This is an incredible amount of computing power. To get a better sense of how XTX is using these chips, I asked Jacob Choi, CEO at Linq Alpha, who provided additional context:

AI STREET PODCAST

You can create a pretty compelling podcast using just the written word with AI.

I uploaded recent AI Street newsletters into Google NotebookLM, which is like ChatGPT, where you can add your notes, PDFs, or news articles and interact with them.

After a few minutes, NotebookLM created a 20-minute podcast with two hosts on topics covered over the last three months of AI Street. It’s surprisingly compelling.

Since it’s relying on the uploaded text, it’s generally accurate and even pulls out relevant quotes. For example, one of the “hosts” at the 7:50 mark highlights a previous interview:

“Jonathan Regenstein, head of AI at Snowflake, put it perfectly, ‘You can’t just bolt AI onto an organization that doesn’t have a good data strategy.’”

All it took was uploading a Word document into NotebookLM and clicking here. Pretty cool.

Listen here:

FUNDRAISING
Italian Fintech Axyon AI Raises €2.1 Million

Axyon AI, an Italian fintech company that offers AI-driven rankings and strategies, has raised €2.1 million in funding. This completes a €6 million round started in December 2023. Investors include US-based Green Sands Equity, Italian firm Investment Opportunity 1, and angel investors. (Press Release)

The funds will be used to expand Axyon AI's asset management innovations.

Links
Amazon Dreams of AI Agents That Shop for You

Amazon feeds its large language models vast quantities of retail data. It says its AI agents might someday be smart enough to buy you stuff without you even having to ask. (Wired)

US May Cap AI Chip Exports to Some Countries

Biden administration officials have discussed capping sales of advanced AI chips from Nvidia Corp. and other American companies on a country-specific basis. (Yahoo)

FCA to Open AI Lab

The FCA is launching an AI Lab to work alongside banks, tech firms, academia, and consumer groups to explore how AI can be safely and effectively integrated into financial services. (Finextra)

AI Poses New Cyber Risks: NY Bank Regulator

New York’s financial regulator said firms need to address the specific cybersecurity risks arising from the use of artificial intelligence, as more regulators aim to ensure the safe use of this rapidly evolving technology. (WSJ)

MATT IN NYC 🗽

I’ll be back in NYC the week of Nov. 11 meeting with AI + Finance folks. Let’s catch up. [email protected] 

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