Hi, I'm Matt. Welcome back to AI Street, your weekly brief on AI + finance.

The Rundown:

• Will AI Bridge Wall Street’s Quant Divide?

• Interview: Ex-Googler Yagnik on building Arta Finance

• Billionaires Back AI-research startup

• AI market moves

• Smaller businesses leading AI adoption

• 🎃 Happy Halloween: AI zombies with immortal Paychecks

INVESTING
Will AI Bridge the Wall Street Quant Divide?

When I started this newsletter, I initially thought that AI and large language models would likely help quantitative investors further distance themselves from discretionary investors. But after speaking with Peter Hafez, Chief Data Scientist at RavenPack, I’m starting to change my mind.

The Quant-Discretionary Divide

Over the past decade, quantitative strategies have continued to grow in part with faster computing. These strategies require specialized skills to create complex algorithms to scan millions of data points. While more traditional, discretionary money managers rely more on human analysis and judgment.

AI as Bridge

LLMs like ChatGPT are making it easier for traditional analysts to become more quant-like by processing unstructured data—from earnings call transcripts to regulatory filings—without needing deep technical expertise. For example, an analyst covering retail companies can now analyze thousands of earnings calls to spot changing sentiment around inventory levels or consumer demand—tasks that previously required significant programming skills.

“What large language models are really doing in the finance space is putting data and quant processes in front of fundamental analysts, in front of discretionary analysts,” Hafez told me. “That was really the missing piece.”

Convergence Underway

RavenPack, which has been developing natural language processing (NLP) solutions for financial markets for the last two decades, recently launched a new platform to bridge this gap, called Bigdata.com. The platform combines traditional NLP capabilities with advanced LLM features.

“There’s a convergence; if you have the pure-play quant and you have the pure-play discretionary investors, both of them are merging,” Hafez said.

He points out that even quant funds are recognizing the value of human judgment for scenarios that machines can’t predict—like geopolitical events.

Reality Check

However, there’s still a long, long way to go.

Yves Hilpisch, an author and expert in AI and finance, notes that despite the hype, traditional investment approaches still dominate.

“Most of the assets under management of the trillions and trillions that are in the industry are still managed by traditional strategies,” he said.

As LLMs become more reliable and widely adopted, this hybrid approach — one that combines quant strategies with human analysts — could mark the next big shift in how portfolios are managed.

AI STREET IN NYC 🗽

FIVE MINUTES WITH…
Arta Co-Founder Chirag Yagnik

Arta Finance, an AI-driven wealth management startup founded by former Google employees, aims to democratize financial strategies typically reserved for the ultra-wealthy.

With over $90 million raised from top VCs and 140+ angel investors, including former Google CEO Eric Schmidt, Arta has gained traction among tech professionals from Apple to Stripe.

This month, former UBS CEO Ralph Hamers joined as advisor, and the company launched its patent-pending AI Copilot for enhanced portfolio management outside of the US.

Arta manages hundreds of millions in assets since launching in the U.S. in October 2023 and earlier this month, opened internationally in Singapore.

AI Street spoke with co-founder Chirag Yagnik, whose expertise spans mathematics, quantitative finance, and technology. Our discussion covers:

• Chirag's journey from DRW's autonomous trading to Google Research

• Arta's mission to serve those with $500K—$25M in assets

• Innovations in robo-advisors, direct indexing, and quant strategies

• LLMs' potential impact on finance over the next decade

• The rapid pace of technological advancement in finance

This interview has been edited for clarity and length.

How are Large Language Models (LLMs) going to impact finance?

Financial services are going to experience a big change over the next decade. That's my hypothesis. The reason is, when you look at what LLMs do, they're really good at taking in information, summarizing it, and extracting key points. And if you look at the value chain in finance, a lot of it is just reviewing documents, right? It's all about processing information.

What LLMs allow us to do is drastically simplify these chains of events that happen in financial processes. Take an ACAT transfer as an example, for those of you who are not familiar, this is the system that allows stocks to be transferred from one account to another across brokerages, etc. Right now, you fill out a form, sometimes you even have to fax it, then someone manually enters that data. In the operations process, there are probably five different checkpoints where people are manually checking stuff. It's inefficient and time-consuming.

Now, imagine automating this whole process with LLMs. It's not going to happen overnight, of course. It'll take many iterations. Maybe instead of three manual steps, we get it down to two, with one step handled by LLMs. But you can see how this could lead to experiences that are way more streamlined and real-time.

Read the full interview here

ICYMI
Recent Five Minutes with Interviews:

• Finster’s Sid Jayakumar on building AI agents for Wall Street

• Bain’s Richard Lichtenstein on AI adoption in private equity

• Snowflake’s Jonathan Regenstein on AI building novel datasets

• Skadden’s Dan Michael on the SEC’s AI stance

• Stardog’s Matt Lucas on hallucination-Free AI

FUNDRAISING
More $ for AI-Powered Investing Platforms

Reflexivity Raises $30 Million

Investors Stanley Druckenmiller, Greg Coffey and Thomas Peterffy participated in a $30 million funding round for Reflexivity, an AI market-research firm formerly known as Toggle AI.

Reflexivity raised the Series B with additional investments from General Catalyst and SoftBank Latin America.

Druckenmiller and Coffey, both hedge-fund managers, had previously invested in the company alongside Millennium Management’s Izzy Englander.

Reflexivity says it can provide insights into more than 40,000 stocks, bonds and commodities. It uses a large language model that ingests both structured and unstructured data — things like trading statistics and SEC filings.

Reflexivity says its clients include Millennium, Soros Fund Management, ExodusPoint, Duquesne and Lombard Odier, according to Bloomberg.

Peterffy, who is the founder of Interactive Brokers and who alongside venture-capital firm Greycroft led the round, said in a press release that he was looking forward to integrating the company’s “advanced AI capabilities” into his platform.

Brightwave Raises $15 Million for AI Financial Research

Brightwave, an AI-powered financial research platform, raised $15 Million in Series A funding led by Decibel Partners with OMERS Ventures participating, according to an Oct. 29 announcement. The round comes just four months after a $6M seed round.

• Revenue grew 4x since seed round

• Platform uses proprietary knowledge graph to analyze SEC filings, earnings calls, and news

• Clients include hedge funds, private credit investors, and institutional asset managers

• CEO Mike Conover previously co-created Databricks' open source AI model Dolly

The rapid fundraising (two rounds in four months) highlights intense competition for AI + finance startups.

Wave of Fundraising

The sector has seen significant fundraising activity recently: Rogo raised $18.5M Series A (Khosla Ventures), Quartr secured $6M (Altos Ventures), BlueFlame AI landed $5M Series A, and Linq raised $6.6M (InterVest, Atinum).

These platforms focus on streamlining investment research and analysis through AI, particularly in handling unstructured data like earnings calls and SEC filings. Most target institutional rather than retail investors.

Have an AI investing platform to add to our list? Email [email protected].

AI MARKET MOVES
Biggest (±3%) AI Stock Movers Through October 30

Data provided by Linq Alpha, an AI copilot for hedge funds. 

• Digital Realty Trust (DLR) +9.9%: Strong 3Q performance; management noted robust demand, with AI representing 50% of total bookings.

• Alphabet (GOOG) +7.1%: Strong 3Q results, with AI-driven growth in cloud workloads and Gen-AI products.

• International Business Machines (IBM) -6.2%: Mixed 3Q results; a strong start in GenAI consulting was insufficient to counter revenue shortfall.

• Advanced Micro Devices Inc. (AMD) -3.2%: In-line 3Q results; disappointing 4Q24 guidance have seemingly weighed on the share price, despite anticipated growth in Data Center GPUs.

• Broadcom (AVGO) +3.1%: Reportedly collaborating with OpenAI to develop an AI inference chip.

ADOPTION
Smaller Businesses Leading In AI Adoption: Wharton

New research from Wharton AI & Analytics Initiative shows that smaller companies are adopting AI at a faster pace than their larger counterparts: Weekly AI usage rates by company size:

• $50M-$250M revenue: 80%

• $250M-$2B revenue: 78%

• $2B+ revenue: 48%

While mid-sized and smaller enterprises show similar, high adoption rates, the largest organizations are proceeding more slowly — hard to turn a big ship around.

LINKs
Citi Moves to Google Cloud for AI Push

• The fourth largest bank by assets, which currently relies heavily on hardware, is moving parts of its vast financial infrastructure to Google Cloud. (Yahoo Finance)

BofA AI Patents Jump 94% Since 2022

• The U.S. bank now has nearly 1,100 AI and ML patents and pending applications in its portfolio, with more than half having already been granted. (Finextra)

AI Power Plants Get $50B Boost

• KKR and Energy Capital Partners are targeting near-term power-generation projects to support AI development. (WSJ)

AI GHOULS 👻 
With AI, Dead Celebrities Are Working Again—And Making Millions

From voiceover work to 'digital human' acting jobs and immersive stage shows, celebrities like Judy Garland, James Dean and Elvis might be dead, but their paychecks are immortal. (Bloomberg)