Since its launch, synthetic intelligence bot ChatGPT has attracted an terrible lot of consideration. However simply how helpful it’s for selecting investments? For a little bit of enjoyable, I requested it to determine the very best worth inventory within the FTSE 100 to ponder shopping for now.

The result was attention-grabbing, to say the least.

And the winner is…

ChatGPT’s selection of inventory was none apart from British American Tobacco (LSE: BATS), at the very least based mostly on my search. However why?

One purpose given was that the corporate trades at a low price-to-earnings (P/E) ratio of seven. Provided that the common UK inventory trades on a P/E within the mid-teens, that doesn’t really feel too controversial to me.

A second purpose was its sturdy money move, generated not solely by gross sales of conventional cigarettes but additionally next-generation merchandise like vapes.

Third, ChatGPT drew consideration to British American Tobacco’s sturdy pricing energy and international attain. It believed that these qualities ought to imply that its in a position to face up to difficult financial environments. That is sensible on condition that its merchandise are extremely addictive.

Final, the stonking 8% dividend yield was highlighted as being engaging to these desirous to generate earnings from their investments.

Taking all this collectively, ChatGPT offered an analyst estimate of truthful worth for the inventory to be round £39 per share. If that involves cross, it will signify a 32% achieve from the place we are actually.

Ought to I contemplate shopping for?

As attention-grabbing as this little check was, I do have a couple of reservations.

By far the largest concern for present holders is the truth that cigarette gross sales are in long-term decline. To its credit score, ChatGPT did flag this up. Nevertheless, there was no point out of the likelihood that British American Tobacco might change into a worth lure in time. So, that previously-mentioned ‘fair value’ ought to in all probability be taken with a truckload of salt.

Regardless of not setting a restrict on how lengthy a reply I wished, I additionally discovered that ChatGPT was fairly tight-lipped on some issues that proof has proven can actually matter with regards to a inventory’s returns, resembling an organization’s debt and returns on the capital it places to work. It additionally didn’t say why it believed British American Tobacco to be a higher worth inventory than others within the FTSE 100 with related qualities.

Getting private

Now, don’t get me incorrect — I’m not dismissing generative AI. Fairly the alternative. It should change all of our lives in time. Some may argue it already has.

However one wants to pay attention to its present limitations when utilized to investing. Along with the problems talked about above, it has no concept of my objectives, time horizon, threat tolerance or whether or not I even contemplate it moral to spend money on a enterprise like this. Figuring out these items is key with regards to constructing a portfolio of shares that I can persist with for the long run.

Taking this under consideration, I regard this as a software which may assist to slender down an inventory of shares to those who could warrant additional research. However put all my religion in it to assist me get wealthy? Not an opportunity!

As for its prime choose, let’s see what occurs to British American Tobacco over the course of 2025.