Let's Put the AI Monster to Work on Dow Chemical - DOW - $27
Let’s test the “Analyze with AI” feature on Seeking Alpha. I have waited for many months to test this feature for the first time. I know that I will be unimpressed. I was always a teacher that gave tough spot quizzes, so let’s start by giving the silicon monster a chance to analyze Dow Chemical.
To me AI is most likely a hoax. Obviously “machine learning” has been going on for 20+ years . For example, Etsy Corp. has been using computers to match its millions of customers with its millions of suppliers. They get a little better each year, but they will never “solve” the problem. As a chess player, it was impressive to watch the program LEELA “learn” to play chess with only knowledge of the rules. So far LEELA is no better than the chess engine Stockfish that is programed the old fashioned way, without AI.
Maybe AI will put me into retirement is the next hour.
Let’s lay out what I would expect from a junior analyst if I handed them Dow - DOW - $27, and gave them 8 hours.
I would expect:
a report that comes back with a clear recommendation
a report that gave a good history of the duPont merger and separation
a report that compares DOW and LyondellBasel - LYB - $59
a report that compares DOW to other high yield stocks
a report that clearly explains DOW’s “trough” earnings and tries to use some concept of “earnings power”
a report with a clear analysis of DOW’s debt maturity schedule, and its ability to keep paying its dividend
some analysis of recent attempts to sell assets to pay the dividend
some discussion of the effects of lower US natural gas prices on the long-term fundamentals of the petrochemical business
some discussion of DOW’s overexposure to homebuilding and auto production
some discussion of low expectations being a positive for the stock
any analysis of DOW’s owners, or recent buyers/sellers
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Ok, unleash to Kraken. I pushed the Seeking Alpha AI button for the first time.
Oh my, what a complete and utter failure.
I expected very little and got even less.
Pressing the Seeking Alpha “analyze with AI” button in a complete waste of time. I love Seeking Alpha and deeply respect all the work they have done to improve their site over time, but the AI button is worthless.
The report was 100% descriptive and 0% analysis
The report made the “rookie” mistake of saying that DOW was selling at 61x earnings, without providing any context. This is an absolute abysmal failure of understanding. My AI monster would be fired on the spot.
The report at least mentioned LYB, but made no comparison. The report at least mentioned low cost gas supplies, but again did no analysis.
The AI report did none of the 11 things I expected. My job is safe.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Ok, let’s try Chat GPT for the first time and ask:
Should I invest is Dow Chemical?
After the horrible showing of Seeking Alpha’s AI tool, Chat GPT was marginally better. Let’s give Chat GPT a D- instead of a straight F.
Chat GPT was better because:
Chat GPT at least said the 10% yield might be a sign of market skepticism, this is a fairly advanced concept
Chat GPT at least used the term “trough earnings”, but then could not analyze it in any meaningful way, at least it did not make the “rookie” mistake of calling out 61x earnings without context
Chat GPT made the comparison to LYB, and at least called it out as a safer alternative
If I knew nothing about about Dow Chemical, the Chat GPT response would give me “C-” summary of the situation. It gives a few useful points, but makes several key mistakes. If I had read Seeking Alpha for 30 minutes, the Chat GPT summary would be worthless.
One sentence in the Chat GPT answer was very concerning.
Chat GPT said “spikes in trading volume may indicate deep-value appeal to some investors”.
That is complete gibberish. Trying to use spikes in trading volume to say a stock is attractive, is a completely made up concept. What else is Chat GPT just making up? The more I think about it, that Chat GPT answer is actually quite frightening. Maybe some complete idiot on Reddit wrote about spikes in trading volume, but for Chat GPT to call that out as a conclusion is exactly the type of error you do not want AI to make.
Run for the hills.