As the power of artificial intelligence (AI) continues to expand, so does its influence in financial markets. AI-powered tools help today’s investors identify market trends and patterns or quickly analyze investor sentiment.
One recent survey shows that more than half of investment managers are already using AI in their investment processes, with another third who say they’re planning to incorporate the technology.
Below, we’ll examine the role AI plays in secondary markets — the growing sector where stocks, bonds, and other previously issued securities are traded.
The private secondary market has seen explosive growth in recent years. Investment bank Jefferies Financial Group found secondary transactions totaled around $162 billion in 2024 — a 45% increase from the previous year.
Platforms like Augment* are helping lead the surge. The innovative marketplace allows investors to buy and sell existing stakes in private companies or funds before a traditional exit event, such as an IPO or acquisition. This means individuals and smaller institutions like pensions or endowments can access private equity funds or venture capitalist portfolios; traditionally, they might be excluded due to high capital requirements.
AI systems employ highly advanced algorithms that quickly process vast amounts of historical and real-time data. This can help investors improve their decision making in secondary market transactions.
AI systems can interpret structured data — think financial statements or changes in stock prices. But these systems can also process unstructured data, such as news articles or social media posts. The result is a more nuanced, holistic understanding of the current market.
While using AI isn’t the same as having a crystal ball, the technology can help predict market trends, gauge investor sentiment, or manage risk.
Investors might also use AI to divvy up investments into different asset classes, tailoring the portfolio to their goals, risk level, and market conditions. And they can continue using AI to monitor the portfolio, making adjustments as the market changes.
Several specific AI technologies are contributing to its rise in financial markets.
AI has brought a number of benefits to the financial sector. Quick, automated transactions have increased efficiency. Algorithms have the ability to process multiple large data sets at the same time, yielding more accurate pricing. This is especially useful in the sometimes-murky secondary market, even as platforms like Augment improve transparency by displaying real-time pricing for private companies.
But the rise of AI in secondary markets presents its own set of challenges, too. Regulatory bodies including the Securities and Exchange Commission (SEC) have warned investors about scammers who might take advantage of AI’s complexity and growing popularity. AI-generated information can be inaccurate, biased, incomplete, or misleading, they cautioned. These shortcomings could evolve as the technology improves.
AI is transforming secondary markets. Transactions are generally faster, safer, and more efficient. Technologies like ML and NLP rapidly analyze huge amounts of data, empowering investors to make better-informed market predictions and stock purchases.
AI will continue to reshape the landscape of financial markets, underscoring the need for regulation to keep up with the rapidly developing technology.
As interest grows in private secondaries, investors are also looking for smarter tools and rankings to help guide their decisions. Resources like a curated pre-IPO stock list can provide added confidence and clarity in identifying the most promising private companies to watch.
*Securities transactions are executed on Augment Capital, LLC's ATS and offered through Augment Capital, LLC (member FINRA/SIPC).
Important Disclosures: Investing in private securities involves substantial risk, including the potential loss of principal. Private securities are typically illiquid, have limited pricing transparency, and often require longer holding periods. These investments are available exclusively to qualified accredited investors and offer no guarantee of returns. Additionally, past performance of private securities does not indicate or predict future results.