AI Has Been Impacting the Market for Years
Artificial Intelligence is on everyone’s radar these days (well before recent developments). For those of us in capital markets, its impact has been evident for a long time - whether you've realized it or not.
AI has been disrupting our industry for years. I think it was about 10 years ago, I started fielding questions from executives about erratic stock market behaviour, driven by rising liquidity and shifting trading patterns. What we were seeing was AI’s influence taking hold through high-speed algorithmic trading, reshaping liquidity and driving volumes. Today, AI is at the centre of a rapidly evolving financial landscape, and we need to adapt.
Here are some insights I think every company leader should have top-of-mind about AI-driven trading patterns with some ideas on how we can adapt accordingly.
✨ AI’s Impact on Trading Dynamics ✨
➡️ Trading Volume: AI-powered algorithms and high-frequency trading (HFT) execute trades within milliseconds, with significant impacts on volume — even for otherwise illiquid stocks.
➡️ Increased Volatility: While AI can make stocks easier to trade, it has also introduced more volatility (think flash crashes like we've seen in crypto (Dec 24), nickel (May 2022), and on the Dow (May 2010)).
➡️ Market Access for Individual Investors: AI tools are becoming more accessible, empowering individual investors but also increasing complexity and potential risk.
✨ How Companies Can Adapt ✨
❶ Enhance Transparency & Disclosure: Proactively share material and non-materials updates, detailed financials, and strategic insights to foster market confidence. Deliver on what you say you're going to do and, if you can't, tell the market why as soon as you can.
❷ Focus on Long-Term Value Creation: Build a resilient company focused on sound financials, innovation, and a sustainable business model.
❸ Leverage AI Internally: Employ AI to improve operations, drive data-informed decisions, and explore how AI can contribute to your corporate objectives.
❹ Engage Regulators & Exchanges: Stay ahead of regulatory changes and provide feedback to help shape future policies.
❺ Build Strong Relationships: Cultivate relationships with investors, analysts, and other stakeholders by addressing concerns and staying transparent.
AI is transforming trading, liquidity, and investor relations strategies. By focusing on transparency and adaptability, we can thrive in this new landscape. Remember, control what you can control — that's the best use of your time and focus. You can't control it all.
Are you ready to lead in an AI-driven market? Reach out to learn how Inflection Communications can help you communicate value in the world of evolving financial markets.
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