Dimensional founder says AI won't alter stock market efficiency

David Booth, founder of Dimensional Fund Advisors, argues that AI will not change how stock and bond prices are set because markets efficiently incorporate all available information. He compares AI's potential to past innovations like refrigeration, but says it won't give investors an edge in picking winners. Booth emphasizes that historical data shows most professional stock pickers fail to beat the market.

David Booth, founder of Dimensional Fund Advisors, draws on his University of Chicago graduate studies, where he participated in the data revolution that established market efficiency. He notes that before 1960, the typical market-wide portfolio return was unknown; a century of data now shows US stocks averaged roughly 10% annually. Booth argues that because markets process all available information faster than any human or model, AI cannot reliably identify mispriced stocks.

Booth illustrates the unpredictability of winners using historical examples. Of the top 20 telecom stocks in 1999, only one survived in its original corporate structure by 2024. Google did not go public until 2004, and Levi Strauss emerged as a surprising Gold Rush beneficiary. He concludes that attempting to pick AI-era winners risks becoming a big loser, whereas owning the entire public market avoids that gamble.