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TARIFFS

Will Whatever-the-Hell-Just-Happened-with-Tariffs Speed Up AI Adoption?

The markets had some of the biggest daily gains and losses in more than 20 years this week, sparked by a chaotic rollout of U.S. tariffs aimed at reversing decades of offshoring.

Then President Trump declared a 90-day pause resetting things to where we were last week. Tariff uncertainty has raised the possibility of an economic downturn.

Research shows companies often use recessions or the threat of a slowdown to automate jobs.

Some CEOs aren’t waiting for a slowdown. Shopify CEO Tobi Lutke told employees they have to show jobs can’t be done by AI before asking for more headcount and resources.

Shopify's endorsement of AI contrasts with muted mainstream adoption.

Research from Pew suggests there’s a big gap between perception and reality:

• Perceived AI Use: 79% of AI experts believe Americans interact with AI frequently—almost constantly or several times a day.

  • Only 27% of the public agrees

• Chatbot Adoption: While nearly all experts (98%) have used AI chatbots, just 33% of U.S. adults have. Of those who’ve tried them, 61% of experts found them very helpful, compared to 33% of the public.

I would’ve expected far more people to be using AI in ways similar to these “experts,” defined as U.S.-based professionals who’ve presented at major AI conferences.

I think it’s important to keep this in mind. Most people are unaware of AI capabilities. And I share this point of view in the Washington Post:

To be clear: I’m not suggesting robots are going to throw everyone out of a job. And this isn’t going to happen overnight.

But if we do have a slowdown, it’ll be used as an excuse for broader automation so we may hear more AI mentions on earnings calls.

REGULATION

BOE Signals Caution as Hedge Funds Test LLMs

The central bank is warning that autonomous AI could cause market calamities without supervision

The Bank of England says hedge funds are testing generative AI, but not using it in live trading yet.

From the report:

• Firms are using LLMs for research, like analyzing alternative data

• Neural nets haven’t shown clear advantages over existing strategies

• High-frequency shops account for 50%+ of AI-related patents

• Barriers: unpredictable behavior, data gaps, risk management issues

This testing phase squares with what I’ve been hearing: most firms are still getting acclimated with the technology.

ADOPTION

AI Adoption Keeps Expanding

A flurry of news over the past week on AI adoption/ use cases:

Banking Execs Expect AI to Transform Industry: Survey

A global Temenos survey of 420 banking leaders found:

• 75% of banks are exploring generative AI deployment.

  • Of those, 36% have already deployed or are currently deploying GenAI.

  • Another 39% are evaluating opportunities.

• 43% of banks already deploying or exploring GenAI plan to increase their investment this year compared to 2024.

• 73% believe Agentic AI—systems capable of making decisions and taking actions independently—will transform banking.

AI Might Become “Competitive Necessity”: Fed’s Barr

Federal Reserve Governor Michael S. Barr said in an April 4 speech that generative AI might become a “competitive necessity” given the rapid advances in the technology.

While banks are currently cautious about AI due to accuracy concerns, he sees it transforming customer service so effectively that people might prefer AI helpers over human staff.

Financial Firms Split on GenAI Payback Timeline

Financial institutions show stark division on GenAI investment returns, with roughly a third each expecting payback within 6 months, 1-2 years, or 3+ years, revealing fundamentally different AI implementation approaches despite 80% planning significant AI investments this year, according to Broadridge.

• Quick-win seekers (35%) target immediate productivity gains through off-the-shelf GenAI solutions

• Infrastructure builders (33%) invest in deeper integration for long-term efficiency and customer experience improvements

• Strategic transformers (24%) pursue comprehensive AI implementations despite longer 3-4 year horizons

• First movers (21%) already reporting benefits while regulatory concerns loom large

BofA to Spend Almost A Third of Tech Budget on AI

The bank is spending almost $4 billion on new initiatives including AI. (Press Release)

• Erica for Employees, an internal AI chatbot, is used by more than 90% of BofA’s 213,000 employees, reducing IT support calls by more than 50%.

• Bank of America developers using a generative AI-based coding assistant saw efficiency gains of 20%

ICYMI

Quant Investing Meets Generative AI

Will human traders face off with “thinking” machines?

In the latest AI Street Markets (out on Sundays), I dive into quant use cases for generative AI.

What makes LLM-driven AI different is its approach. While sometimes dismissed as mere 'pattern-matching,' with enough data, results matter more than methodology. A recent Nature paper showed AI weather forecasts matching or beating traditional physics-based systems.

In finance, most AI tools target fundamental investors, but quantitative hedge funds are now exploring probabilistic LLMs:

• Man Group’s AlphaGPT helps generate trading strategies.

• Permutable AI trains models through expert trader feedback

To get a better sense of where this is all going, I reached out to Bokai Cao, co-author of the paper From Deep Learning to LLMs: A Survey of AI in Quantitative Investment. His research confirms the industry is still in the early stages of adoption.

👉️ Click here for the full article, where I dive into the potential future of AI in quant investing. 👈️ 

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Check out the last few editions on using AI for investment analysis,* creating customized news feeds and tracking earnings call mentions:

• Automating Peer Groups

• Analyzing Earnings Call Tone with AI

• Separating Facts from 'AI Nonsense'

• AI Due Diligence: AnalystAI

• Tracking Big Tech's AI Spending

• DeepSeek on Earnings Calls: From Zero to 100+ Mentions

• Demo: AI Agents in Market Analysis

• ChatGPT's Task Scheduling: Automated Market Analysis

• Effective Prompts For Investment Research

*Not investment advice

WHAT ELSE I’M READING

• Microsoft to Let Consumers Tailor AI Assistant to Their Needs (Bloomberg)

• Microsoft AI head sees advantage in building models ‘3 or 6 months behind’ (CNBC)

• Andreessen Horowitz seeks to raise $20 billion megafund amid global interest in US AI startups (Reuters via Yahoo)

• Wealth Managers See AI, Private Assets As Growth Drivers: Survey (Family Wealth Report)