Billionaire Ken Griffin, CEO of Citadel, has expressed skepticism about the impact of generative artificial intelligence (GenAI) on hedge fund performance. Griffin says that GenAI has not yet delivered the anticipated market-beating returns.
Speaking Wednesday at the JPMorgan Robin Hood Investors Conference in New York, “With GenAI, there are clearly ways it enhances productivity, but for uncovering alpha, it just falls short.”
Griffin’s remarks reflect a broader industry perspective. Umesh Subramanian, Citadel’s CTO, stated earlier this year that achieving lasting alpha would still be challenging, even with a reliable quantitative trading AI that could backtest its own decisions.
“In a world where the AI was making the trading decisions, everyone would know what it would do,” said Subramanian. He added that true alpha exists at the frontier of innovation—“that is where human beings come in.”
Amidst the AI hype, Subramanian noted that AI is a tool rather than a revolution and that it’s not even that new. He continued to say that Citadel’s quant traders have used machine learning for 10 years: “Google came out with tensor flow and within like a week we put that to use to make money.”
Griffin believes AI is unlikely to displace that many people as projected
Griffin has made similar remarks in the past, suggesting that AI’s usefulness in analyzing investments is only modest and that fears of mass job losses are overblown.
Speaking at the conference, he emphasized that generative AI is unlikely to spark a radical transformation. “It is going to have some effect, but the effects are not transformative and they’re going to be different across sectors,” he said. AI has motivated US companies to invest more in technology and increase the value of CTOs, hastening shifts that were previously stalled, he added.
However, in a surprise move, Citadel actually increased its stake in Nvidia by over four times, purchasing approximately 6.5 million more shares and raising the value of its holding to around $1.5 billion.
Nvidia has emerged as the chip supplier of choice for the AI industry, which has hundreds of billions in wealth and vast stores of data at its disposal.
Citadel has also boosted its stake in Chipotle Mexican Grill by about 167%. However, it scaled down its Palantir stake by about 50%, divesting approximately 640,000 shares.
Citadel plans to acquire German’s FlexPower
Recently, Citadel also announced a definitive agreement to buy out Hamburg-based power trader FlexPower. The firm’s planned purchase of FlexPower is a strategic investment designed to fuel the company’s expansion. It also serves as a clear message that it won’t let rivals chip away at its dominance in its commodity business.
According to reports, the partnership will integrate Citadel’s data-driven risk and technology expertise with FlexPower’s renewable trading knowledge to reach a broader range of producers and consumers across Europe. Typically, Citadel usually avoids big takeovers, though it snapped up Japanese power trader Energy Grid in 2024 and is setting up a commodities trading center in Australia.
Citadel’s commodities supremo Sebastian Barrack noted that acquiring FlexPower would help Citadel broaden its reach in power trading and build on its strong track record in global energy markets, while backing the development of reliable European power systems.
However, the acquisition is striking in part because Germany hasn’t exactly rolled out the red carpet for major U.S. financial institutions, especially alternative investment firms, and energy policy is always a politically fraught issue. While power trading doesn’t appear politically risky on the surface, some German politicians would no doubt seize the chance to blame an American hedge fund if prices climb.
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Source: https://www.cryptopolitan.com/citadel-says-genai-has-failed/
