Where Will Investors Find Alpha in the Age of AI? With Alistair Smallwood, Head of Applied AI at Primer
As AI becomes increasingly capable of conducting fundamental investment research, the question is shifting from what these systems can do to where investors will find their edge.
In this episode of Invest with AI, Brett Caughran sits down with Alistair Smallwood, Head of Applied AI at Primer and a former fundamental investor, to explore how AI is changing equity research, alpha generation, and the role of human judgment in investment decisions.
Alistair has spent the last several years building AI-powered research infrastructure, first at a long/short equity fund and now at Primer. His perspective is that while AI will make traditional research processes faster and more systematic, it could also introduce new biases and market inefficiencies.
His team tested 550 earnings calls across five foundational large language models and found that 85% of the calls were interpreted positively, despite approximately 30% of the companies missing earnings. As more investors rely on AI-generated analysis, Alistair believes these shared biases could create new opportunities for fundamental investors who understand how the systems work.
The conversation also explores Primer's work on scaling mosaic theory, using AI to connect information across thousands of company filings and identify relationships that might otherwise take analysts weeks to uncover. It's an example of how AI could move beyond automating existing workflows toward entirely new methods of investment research.
But automating research doesn't necessarily mean automating investment decisions.
Brett and Alistair debate the limitations of AI when it comes to interpreting management behavior, anticipating structural changes, understanding market psychology, and developing conviction in an investment thesis. Their discussion raises a larger question: As access to sophisticated AI becomes more widespread, will human judgment become an even more important source of competitive advantage?
We get into:
Where the next sources of alpha may emerge, and why AI could create new market mispricings rather than eliminate them
Mosaic theory at scale: how Primer uses AI to connect information across thousands of company documents and identify potential investment signals
The shift toward systematic fundamental investing, and why Alistair believes research teams may increasingly resemble quantitative teams
AI-generated earnings forecasts, including Primer's results against consensus and the potential emergence of an AI-driven expectations benchmark
Why human judgment still matters, particularly when evaluating management teams, regime shifts, and longer-term investment opportunities
The risks of relying on AI-generated conclusions, from model biases to the challenge of evaluating research quality
The barriers to AI adoption across hedge funds, including the skills gap, compliance requirements, and the difficulty of changing established investment workflows
The bigger takeaway isn't that AI will replace fundamental investors or that traditional investing will remain unchanged. It's that the research process itself is evolving, and investors will need to rethink how they use technology, evaluate information, and identify opportunities that aren't already reflected in market prices.
If you're working in fundamental investing or building AI into your research process, watch the full conversation to hear Brett and Alistair debate where the next opportunities for alpha could emerge.
Chapters (Timestamps)
[00:00] — Introduction
[00:27] — From Fundamental Investing to Applied AI
[03:08] — The Evolution of AI in Equity Research
[06:54] — Building AI Systems That Survive Model Upgrades
[08:46] — Mosaic Theory and the Future of Investment Research
[11:50] — Scaling Mosaic Theory with AI
[17:02] — Can AI Replicate Human Investment Research?
[19:51] — The Future of AI Skills and Autonomous Research
[22:38] — Why Evaluating AI Output Matters
[24:10] — How AI Could Reshape Alpha Generation
[27:38] — AI Bias and Market Mispricings
[30:44] — AI-Generated Earnings Forecasts and Expectations
[33:00] — The Limitations of AI Benchmarks
[37:07] — Where Human Judgment Still Matters
[42:19] — AI's Impact on Investment Horizons
[47:02] — The Future of Factors and Risk Models
[48:07] — The AI Skills Gap Across Hedge Funds
[50:31] — Why Fully Autonomous Investing Remains Challenging
[56:09] — Finding Alpha Beyond First-Order AI Insights
[57:54] — The Risks of Misinterpreting Alternative Data
[59:36] — Building and Scaling Primer
[1:03:36] — AI Adoption, Compliance, and Data Security
[1:06:58] — The Future of AI Adoption in Investment Firms
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