A false tweet about tariff plans caused the S&P 500 to swing eight percentage points within minutes. The rebound was attributed to algorithmic trading bots that react within seconds to announcements that may affect stocks. AI is already dominating algorithmic trading, with an estimated 70–80% of US trading volume and about 89% of global trading volume handled by AI-driven algorithms. As AI capabilities improved, hedge funds and algorithmic traders increased reliance on real-time data processing and near-accurate forecasting. AI can ingest satellite imagery, earnings call transcripts, social media sentiment, and breaking news, extracting signals that were previously invisible or opaque. AI also moves beyond rule-based systems by learning and adapting to improve efficiency and trading outcomes.
"On 06 April, a false tweet about President Donald Trump's plans for tariffs led the S&P 500 to swing eight percentage points in minutes. However, the $2.7 trillion market rebound wasn't driven by traders themselves, but by algorithmic trading bots trained to react within seconds to announcements that might affect the stock market."
"Speaking to Bloomberg, Benn Eifert Managing partner and co-chief investment officer at the hedge fund QVR Advisors said "You have a daisy chain of buying reactions in response to a headline". He added, "algorithms are tuned to react extremely quickly to any kind of headline reversing tariffs.""
"It is estimated that 70-80% of trading volume on the US stock market is executed through AI and algorithmic trading systems. Globally, the figures are even higher. Almost 89% of global trading volume is handled by AI-driven algorithms."
"Satellite imagery of retail car parks, earnings call transcripts, social media sentiment, breaking news: AI can ingest all of it in real time and extract signals from sources that would have been invisible, or at least opaque a decade ago, even to the most advanced algorithm. AI helps traditional algorithmic trading models move beyond constrained rule-based systems."
Read at Business Matters
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