EquBot

As if professional mutual fund managers didn’t have it hard enough.

Not only do they have to contend with the growing popularity of low-cost index funds, which simply buy and hold the entire market, but now here comes another threat: robot stock pickers.

That’s right.

The San Francisco firm EquBot has launched the first retail ETF to be managed using IBM’s Watson supercomputing artificial intelligence technology.

The use of computers to buy stocks isn’t new. So-called “quant funds” (short for quantitative analysis) have been around for years, relying on computer algorithms to identify short-term trading patterns and opportunities in the market.

But the AI Powered Equity ETF (AIEQ), which launched late last week, differs in that it is uses artificial intelligence to pick stocks in much the same way humans have for decades—by ranking investment opportunities on a variety of factors, including fundamentals such as profit growth and valuations.

EquBot notes that its AI technology can do humans one better because it can process over 1 million pieces of information a day—including earnings releases, economic data, consumer trends, industry developments, and headline news—to constantly update its assessment on roughly 6,000 publicly traded companies.

It then uses that computing power to select 30 to 70 stocks to own “based on their probability of benefiting from current economic conditions, trends, and world- and company-specific events,” according to a recent release.

“EquBot AI Technology with Watson has the ability to mimic an army of equity research analysts working around the clock, 365 days a year, while removing human error and bias from the process,” said EquBot CEO and co-founder Chida Khatua.

The fund’s AI technology also benefits from “machine learning,” he added—meaning it can learn as it goes, without having to be reprogrammed by humans.

So far, in its first few days of trading, the fund has gained 0.7%, according to Morningstar. That beats the 0.5% for the S&P 500 index.