How AI Is Mitigating Threats In Capital Markets
Capital markets have always been defined by risks and rewards. But in recent years, these risks have increased at an alarming rate. From AI-powered disinformation campaigns designed to drive down stock prices to algorithmic manipulations triggering selloffs, public companies now face threats they couldn’t have imagined a decade ago.
Take the example of pharmaceutical giant Eli Lilly. A fake tweet from an impersonator’s account announced that insulin was now free. Amplified by bots and viral sharing on social media, misinformation erased 4.5% of the company’s stock price in a matter of hours.
Even if the misinformation was corrected, the damage — both to investor confidence and market perception — was already done. Another good example is the GameStop saga, where the coordinated action of an online community led to massive stock price inflation, exposing institutional investors to billions in losses.
“Today, cybersecurity is not just about protecting servers or data centers; it’s about preserving trust,” said Yehuda Leibler, president and CTO of financial market intelligence firm Arx. “Whether it’s a fake news campaign targeting a company’s reputation or the hijacking of a stock symbol for manipulation, the attack surface has increased exponentially for publicly traded companies in sotck exchange.”
The good news, however, is that thanks to AI-powered tools, publicly traded companies now have the opportunity to fight back.
AI-driven threats to capital markets
The Eli Lilly and GameStop incidents reflect a growing trend in which malicious actors use AI, social media and other digital tools to manipulate market dynamics, causing markets to collapse in some cases. And when financial markets collapse, it often has disastrous consequences for the economy, leading to devastating consequences for businesses and individuals alike.
Another particularly troubling trend is what Leibler calls tickerjacking. In these attacks, malicious actors flood social media platforms with posts using a legitimate company’s stock symbol, such as $AAPL, to trick users into fraudulent schemes or spreading misinformation. Sometimes these campaigns artificially inflate the prices of another stock. Other times, they erode trust in the company’s brand, leading to reputational and financial consequences.
Legal experts around the world are also noting the tectonic shifts that AI is causing in the marketplace. “The purpose of securities law is to ensure a fair and equitable marketplace. However, we are currently seeing a breakdown in this balance as AI increasingly influences traditional market dynamics between supply and demand,” said Gary Emmanuel, a shareholder in Greenberg Traurig’s Capital Markets Practice, whose his expertise is in corporate titles. “Public companies and regulators should consider whether there are tools capable of detecting potential AI-based market manipulation in order to develop both safeguards and plans to counter different types of threats,” he said. he added.
The value of AI in capital markets
Although the value of AI is widely debated across industries, publicly traded companies that invest in AI-based security tools are seeing real results using AI to protect their assets reviews. Unlike traditional cybersecurity measures, which often react to breaches after they occur, AI-based solutions proactively monitor and analyze large amounts of data in real time.
For example, Arx uses AI to detect unusual patterns in market activity and social media sentiment. In one case, the company identified signs of a digital-focused hostile takeover before any SEC filings were made. By analyzing narrative changes on social platforms as well as business anomalies, the company was able to alert the affected business and help them take steps to mitigate the threat before it escalates.
Beyond defending against risk, these AI-powered tools can also help optimize investor relations, capital raising and growth, while filling critical information gaps. “When you go public, you are no longer just managing your core business,” noted Rotem Gantz, CEO of Arx. “You manage an additional product: your stock. And like any product, to be successful it needs cyber protection, data-driven product management and market analytics. But public companies other than Apple or Berkshire Hathaway aren’t exactly equipped to handle a completely new operation — this is especially true given how quickly things move in today’s financial markets.
A call to action for public companies
As the lines between AI, cybersecurity, market strategy and corporate reputation continue to blur, public companies must rethink their approach to risk management. The issues are no longer limited to IT systems: they encompass valuation, shareholder confidence and long-term growth.
“The capital markets have become a battlefield,” Gantz said. “But with the right tools and strategies, businesses can protect themselves and have a real chance of thriving. The key is to recognize that the threats have evolved, and so have the solutions.
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