The Artificial Investor: AI Ears on Earnings – decoding tone, gestures, and words

AI: The Artificial Investor a DGA Group series exploring how best to communicate with investors when the machines are listening.

In a world where deepfakes can make Eminem back political parties in South Africa, Vice President Harris give a fumbling speech following President Biden’s decision to drop out of the presidential race, and deceased leaders endorse their political successors in India, the power of AI is evident. While implications of AI manipulation in the political realm are widely discussed, its impact on investor relations, especially in analysing executives’ tone of voice and body language, is equally transformative and can directly influence share prices.

Today, it’s not just about what leaders say, but how they say it. CEOs and top executives are under constant scrutiny, with investors, analysts, and stakeholders dissecting every word and gesture. Advanced AI technology now allows investors to leverage ‘leakage’ from executive communications during earnings calls and Q&A sessions, with the potential to significantly impact stock prices based on the delivery of information – in the form of tone and body language.

Kelvin Rocha, lead data scientist at Refinitiv Labs, emphasises that “profiling the tone of speech, and converting it to text to quantify it across different key topics, such as revenue, is extremely useful” and can provide insights that pure textual analysis might miss.

Even back in 2021, before the public launch of ChatGPT, stakeholders were able to analyse the tone of executives’ speeches to detect discrepancies between their spoken and written words. For instance, language pattern software specialist Evan Schnidman highlighted that IT industry executives were downplaying the potential of semiconductor chip shortages in late 2020 while discussing supply chain disruptions, but an algorithmic analysis found hidden clues in their tone of speech, which betrayed the high levels of uncertainty. It was a few months later that the full extent of the shortage hit the public markets and shares of companies took a hit, which highlighted that the early detection of tonal inconsistency could have positioned investors ahead of market turmoil.

This growing trend of AI-powered tonal analysis in investor relations has significant implications for how companies approach their financial communications and manage their market position.

Some firms are pushing the boundaries by providing sentiment analysis of executives’ tone on earnings calls, examining factors such as intonation, speed, and volume. They even build speech profiles for individual corporate leaders, distinguishing between different contexts like earnings calls and investment conferences.

So, what should businesses trying to navigate this new landscape more effectively consider:

1.?Media Training for Executives: Invest in training that focuses on optimising body language, tone of voice, and micro-movements. This can help leaders convey their messages more effectively and minimize unintentional informational leakage that could negatively impact share prices.

2.?Flexibility in Comms Strategy: Develop the ability to quickly adapt communication tactics in response to evolving market conditions and strategic shifts. This includes being prepared to adjust plans at short notice based on executives’ emotional states on results days, ensuring that body language and tone align with the intended message to prevent sending unintended signals that could be misinterpreted by AI-powered analysis tools.

3. Enhanced AI Monitoring and Analysis: Invest in AI tools to monitor and analyse their communications. Understanding how leaders’ tone and body language are perceived can help make necessary adjustments and stay ahead of market impacts.

As generative AI evolves, its impact on business communications will grow. Companies that adapt by leveraging AI to enhance media training and financial communications strategies will maintain investor confidence and market stability. Analysing and optimizing executive communication subtleties could become a key differentiator in corporate strategy and investor relations.

While ethical considerations remain paramount, businesses must not overlook the practical applications of AI in the investor relations sphere. By focusing on message delivery, not just content, companies can harness AI to navigate modern communication complexities, maintain their market position, and potentially influence share price movements in their favour.