When ChatGPT Misses the Mark: 3 Stocks It Got Very Wrong
Artificial Intelligence (AI) has received incredible attention this year due to the public release of OpenAI’s ChatGPT. Its profound capabilities have successfully captured the imaginations of a swath of audiences from technology enthusiasts and investors to social commentators. That interest has led to the rise of AI stocks, like Nvidia (NASDAQ:NVDA) and C3.ai (NYSE:AI) — sporting triple-digit returns.
Of course, these novel AI chatbots, including ChatGPT, Microsoft Bing’s (NASDAQ:MSFT) Sydney and Alphabet/Google’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Baird, are not without their respective faults. Acclaimed theoretical physicist Michio Kaku recently quipped in an interview with CNN that today’s chatbots are no more than “glorified tape recorders” that just “[take] snippets of what’s on the web, created by a human, splices them together, and passes it off as if it created these things.” Is he correct? Based on some of these disastrous stock picks by ChatGPT, the physicist might find himself validated. Below are three stocks ChatGPT has gotten totally wrong.
3M (MMM)
3M (NYSE:MMM) is a diversified industrial conglomerate that produces a wide range of products, such as adhesives, abrasives, personal protective equipment, health care products and electronic materials. ChatGPT was bullish on 3M at the start of the year, citing its attractive dividend yield. However, according to data from Koyfin, 3M’s stock has declined by 13.8% year-to-date.
The reasons for the drop in share price are multi-faceted. The company began the calendar year by issuing weaker-than-expected sales guidance. 3M’s end markets, which include consumer electronics and retail sectors, have been hit hard in 2023 due to dampened consumer demand and confidence. A lot of that has to do with inflationary pressures eating away at consumers’ disposable income. In addition, 3M faced headwinds from lower demand for disposable respirators due to the easing of COVID-19 restrictions. With 3M expecting macroeconomic pressures to persist throughout the year, ChatGPT’s prediction that 3M would outperform is not likely to come to fruition anytime soon.
Johnson & Johnson (JNJ)
Johnson & Johnson (NYSE:JNJ) is another well-established public equity ChatGPT placed into its portfolio. Perhaps it was due to J&J’s brand power or its sizable annual revenues, but it’s another example of where the chatbot was just plain wrong.
For those who are unaware, Johnson & Johnson is a global healthcare behemoth that sells consumer health products, pharmaceutical drugs and medical devices. ChatGPT’s optimism most likely came from the company’s vast portfolio of well-known products. Still, J&J’s stock has fallen 7% year-to-date.
Relying heavily on its already diversified product portfolio, Johnson & Johnson dealt with years of inconsistent and sluggish revenue growth. Revenue growth picked up substantially in 2021 due to the company’s COVID-19 vaccine playing an instrumental role in fighting the pandemic. With the pandemic now largely behind us, Johnson & Johnson’s year-over-year revenue growth has slowed.
Moreover, lawsuits regarding the company’s baby powder and talc products have affected its reputation. In July, a U.S. judge rejected J&J’s second attempt to resolve tens of thousands of these lawsuits by simply offloading the related liabilities into a new business entity and declaring bankruptcy. As legal battles continue, its growth struggles. It is difficult to say how Johnson & Johnson will return to form in the near term.
Danaher (DHR)
Danaher (NYSE:DHR) is a diversified business with its hands in different life science end-markets, including medical devices, laboratory equipment, diagnostic solutions and biotechnologies. Similar to Johnson & Johnson, Danaher has suffered from uneven top-line growth in the past.
Prior to the global pandemic, Danaher mostly grew revenues somewhere in the single digits. However, at times, the company grew revenues by double-digit percentage points. Then, in 2014 and 2017 Danaher reported a complete decline in sales. During the COVID-19 pandemic, the life sciences company received a considerable boost in revenue numbers due to sales of COVID-19 testing equipment. In fact, 2020 and 2021 appear to be Danaher’s best years for growth.
Unfortunately, the pandemic-induced growth period is over and revenue has slowed. As a result, Danaher’s shares have remained relatively flat year-to-date. The life sciences company also kept guidance conservative for the remainder of the year, which has not elated shareholders but has kept them calm — for now. Maybe Danaher will be able to pick up growth in the future. At the moment, ChatGPT is wrong about this one.
On the date of publication, Tyrik Torres did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
