Is AI Changing the Rules of Value Investing?
For years, value investors have dealt with the roller coaster of human emotions—fear, greed, and crowd behavior. Now, a new concern has arrived: Generative Artificial Intelligence. With Gen-AI products spreading quickly, many worry that their investing skills may no longer matter. But is value investing really losing its place? Or does deep value still have a future? Let’s explore in this special article.
Can AI Take Over Value Investing in the Future?
If you expect this to be a defense of humans against AI, you might be surprised. The reality is that Generative AI is already reshaping value investing. But rather than replacing humans, it is more likely to support and improve traditional methods, changing the competitive landscape in the process.
A true value investor’s strength has never been just about numbers. It comes from using knowledge wisely, staying emotionally disciplined, and having the patience to wait. Warren Buffett is a great example. He doesn’t chase rumors or jump in and out of average businesses. Instead, he waits for rare moments when outstanding companies face temporary stress—and then he invests for the long haul. He mastered this long before data models or algorithms existed.
This is why value investing cannot be fully coded into machines. Trading rules can be programmed. But judgement, patience, and intuition cannot. As the saying goes:
“Algorithms can calculate, but they cannot feel fear, trust their gut, or understand when to wait.”
Why Human Investors Think Beyond Data and Algorithms
Every value investor looks at businesses differently. It is not just about spreadsheets or ratios; it is about connecting the dots in a human, non-linear way.
Once you identify a company through analysis, the real work begins. You study the management, understand the business model, recognize its moat, and keep testing your temperament. This is how you build your own “A-ssortment” of companies—a watch list you know inside out.
So when the market throws tantrums, you don’t panic. In fact, during sharp swings triggered by hype or random events, that’s your chance. That’s when you step in with courage and conviction, while most others freeze in fear.
This is exactly why, even in an AI-driven market, value investing continues to thrive. It makes investors who practice it an unpredictable force that no algorithm can fully mirror.
How AI Is Already Changing Value Investing
AI is already playing a role in investing. Reports show that over 60% of asset managers globally use machine learning for some part of their decision-making. AI-powered hedge funds even outperformed traditional ones in 2023, with returns of 10.1% versus 5%.
In India too, adoption is picking up. According to NSE data, 50–55% of trading volumes in India are now algorithmic, compared to 80% in developed markets. SEBI has also set up working groups to frame clear guidelines around AI and algorithmic trading, ensuring transparency and preventing misuse. This means Indian investors will see AI tools becoming more mainstream in research, analysis, and even retail trading platforms.
Yet, only a small percentage of mutual funds and PMS providers openly admit to using AI as a core part of their strategy. For most, it still works as a back-end research assistant rather than a direct decision-maker.
Where AI Adds Real Value to Investors
AI’s biggest strength is speed and scale. It can scan financial statements, news headlines, social media chatter, and even satellite images of retail parking lots—all in a single day. This helps spot patterns that humans may miss.
AI is also strong at risk management. For example, it can detect how stress in commercial real estate may affect banks, lending, and even retail consumption. By connecting such dots across sectors, it offers deeper insights than traditional correlation models.
Why Human Judgment Still Wins Over AI
Yet, AI has limits. It cannot judge the honesty of a management team or the culture of a company. It struggles with rare events like sudden market crashes or regulatory shocks. Most importantly, AI does not understand human behavior—the fear, greed, self preservation and psychology that drive markets.
That is why the timeless style of Buffett and Graham still works. Their focus on quality businesses, competitive moats, and patient investing is something no algorithm can fully replicate. In fact, Indian investors who stayed invested in companies like Asian Paints or HDFC Bank for decades have seen how patience and conviction can outperform constant trading.
The Future of Value Investing is both Man and Machine
AI will not replace value investors but it will transform how they operate. The future belongs to a hybrid model meaning, AI for data and analysis, humans for wisdom and discipline. The timeless principles of Benjamin Graham and Warren Buffett—margin of safety, business fundamentals, and patience; still hold strong.
For Indian investors, this means embracing AI tools as powerful assistants while sticking to the basics of value investing. The real winners will be those who combine machine efficiency with human judgment to build lasting wealth.
Frequently Asked Questions (FAQ)
Q1: Will AI replace value investors?
No, AI supports analysis and data processing, but human judgment and emotional discipline remain irreplaceable.
Q2: How is AI used in investing today?
AI helps in analyzing market data, managing risk, and detecting patterns faster than humans.
Q3: What’s the future of value investing in India?
AI tools will complement human investors, leading to a hybrid model focused on patience, fundamentals, and smart analysis.
