Tech Transformers

How AI could make you a top stock-picker

With talk of job losses and even taking over the world, artificial intelligence (AI) may scare some people, but one company is working on an app that could make you rich.

German-based Neokami is developing a platform that uses AI to predict the price movement of stocks and commodities over different time periods, the start-up told CNBC.

"Right now people are using technical indicators to predict stock movements, we would be using the same algorithms used by the world's top tech companies for things like image recognition, (and) computer learning but apply that to stock markets," Ozel Christo, founder and CEO of Neokami, told CNBC by phone.

"We can analyse millions of variables within seconds and create a customized predictive model for any stock."

Neokami's platform will be able to pull in traditional data such as analysts' notes or historical movement of a stock as well as analyze variables like sentiment on Twitter or across lots of news articles online about a company. Christo claimed the app would be 75 to 95 percent accurate depending on the time frame of the stock price movement a user wanted to see.

The U.S. and China are the forefront of A.I. development.
Andrea Danti | Hemera | Getty Images

Currently there are High Frequency Trading (HFT) platforms that use complex algorithms to predict the movement of stocks. Whether Neokami can create a platform that is more advanced will depend on their use of AI, experts said.

"It would depend on how you would define AI," Richard Payne, professor of finance at City University London, told CNBC by phone.

"There are plenty of algorithmic trading platforms pulling in data from traditional and non-traditional news sources. But the success will depend on what data is going to be pulled in and how it will be processed."

Ozel said that most HFT platforms are kept internal in the major financial institutions and not open to the public. He is hoping Neokami's platform will make complex algorithmic trading open to everyone.

"I think the main difference is that these HFT platforms are used in house for investment banks, whereas ours would be open to the public. It's something that has never been done before."

Economic predictions

The start-up announced a funding round of $1.1 million on Tuesday. Christo said that the money will be used to get developers on board to create apps based on Neokami's AI technology. This will make the company's tech become the back-end system powering many apps, if they are successful in getting those developers on board.

Neokami is also using part of the money to develop its own in-house AI apps – such as the stock-picking one, due to be released around September, Christo said. The founder also said he is working with a large company to create an AI platform that will allow it to make economic data predictions using the firm's internal data. Christo could not name the company as the talks weren't public.

He gave the example of a credit checking firm that could use Neokami's AI software to analyze all their credit application data including how many loan applications were submitted and approved. The result given by the software would be a proxy for general economic health.

AI's 'wave of popularity'

AI has started to become popular among Silicon Valley's giants. Google last year bought secretive AI company DeepMind for $400 million and has begun experimenting with the tech. Facebook unveiled a photo app called Moments earlier this year that uses AI to recognize a person in the picture. And Barclays told CNBC it was working on an AI app.

Money has been pouring into AI start-ups. Last year, Sentient, another AI company that uses data to create predictions in areas such as finance and healthcare, raised $103.5 million.

But the technology is still in its early stages and some companies might be put off from developing it due to the cost and complexity involved.

Christo said AI is "riding a wave" of popularity at the moment but it's something that company's feel they can't use unless they are a major tech firm like Google or Facebook. He is hoping that the model of letting developers use its AI tech to make a range of apps will change that.

"Executives feel AI is something that can help your organization but if you are not Google or Facebook you might not know how to use it," Christo said.

"We want to approach other Fortune 500 companies and show them how to use AI to build applications. We want to show them how to make money and how to be more efficient."