This month’s quarterly evaluation by FTSE Russell was a moist squib. There have been no modifications to the FTSE 100 index.

To say a prized place in Britain’s main benchmark, a UK firm must have a enough market cap to leapfrog a FTSE 100 constituent. The subsequent alternative for Footsie promotion is available in September’s reshuffle.

I used to be curious which UK shares ChatGPT backs for potential inclusion within the blue-chip index. Right here’s what the unreal intelligence (AI) chatbot mentioned.

There are benefits to being a FTSE 100 member. A enterprise can profit from elevated investor demand as a result of automated share purchases by exchange-traded funds (ETFs), simpler entry to capital markets, and larger visibility for institutional buyers.

There can be a liquidity increase with bigger buying and selling quantity for a corporation’s shares. Plus, FTSE 100 companies are likely to have extra lobbying energy as a result of higher political and regulatory entry.

The shares ChatGPT backed

Counting on AI for inventory market suggestions comes with loads of well being warnings. ChatGPT makes errors. Placing its abilities to the check, I’m afraid my digital aide got here up brief.

The primary inventory it tipped for FTSE 100 promotion was housebuilder Taylor Wimpey. I’m already a shareholder. It’s a stable enterprise with sturdy development potential and large dividends, even when it faces challenges from UK home price weak spot. However, there’s an issue with this choose.

ChatGPT described Taylor Wimpey as “a large-cap member of FTSE 250“. That’s not true. It’s already a FTSE 100 constituent, and has been for over a decade. It will probably’t be promoted to an index it’s already in!

It’s a poor begin, however what in regards to the chatbot’s different decisions?

It additionally picked three bona fide FTSE 250 shares, particularly vitality companies Searching Plc and Ithaca Vitality, alongside defence enterprise Chemring Group.

I’d severely query the inclusion of oil companies firm Searching Plc. It has a market cap of simply £446m. In contrast, the FTSE 100 inventory with the bottom valuation is JD Sports activities, at £3.86bn. ChatGPT’s suggestion that the corporate can ship a ninefold improve in its market cap in time for the subsequent reshuffle isn’t credible.

A FTSE 250 defence inventory

Apart from Taylor Wimpey, ChatGPT was significantly eager to champion defence expertise enterprise QinetiQ (LSE:QQ.).

Valued at £2.82bn, it’s nonetheless a good distance from FTSE 100 membership, however the firm has development potential. QinetiQ operates mission rehearsal amenities and check ranges for army tools and techniques. It additionally has a robust cybersecurity and robotics providing.

As NATO prepares for warfighting readiness in mild of Russian aggression in Ukraine, the long-term demand outlook for QinetiQ’s companies seems to be encouraging. A price-to-earnings (P/E) ratio of simply 10.6 means the inventory’s attractively valued relative to the sector, too.

That mentioned, near-term dangers are excessive. Contract delays within the UK and the US have led to the corporate just lately issuing a revenue warning. This slowdown’s significantly regarding within the context of an ongoing growth for the defence business.

QinetiQ shares could discover their approach to the FTSE 100 sooner or later, however I don’t assume it’ll occur anytime quickly. Proper now, different defence shares appear like extra engaging methods to achieve publicity to this fast-growing business. I received’t be shopping for at present.