On 06 April, a false tweet about President Donald Trump’s plans for tariffs led the S&P 500 to swing eight percentage points in minutes.
However, the $2.7 trillion market rebound wasn’t driven by traders themselves, but by algorithmic trading bots trained to react within seconds to announcements that might affect the stock market.
Speaking to Bloomberg, Benn Eifert Managing partner and co-chief investment officer at the hedge fund QVR Advisors said “You have a daisy chain of buying reactions in response to a headline”. He added, “algorithms are tuned to react extremely quickly to any kind of headline reversing tariffs.”
It was a reminder, if one was needed, that AI is already influencing markets.
AI is already dominating algorithmic trading
It is estimated that 70-80% of trading volume on the US stock market is executed through AI and algorithmic trading systems. Globally, the figures are even higher. Almost 89% of global trading volume is handled by AI-driven algorithms.
As AI tools have become more powerful, hedge funds and algorithmic traders have leaned increasingly on the technology; and for good reason too.
A few years ago, you would have had good reasons to doubt AI’s precision. But now, there can be no questioning its ability to process huge volumes of data in real-time and make close-to accurate forecasts.
How has AI changed algorithmic trading?
Think of AI as a multiplier of an algorithm’s ability. Satellite imagery of retail car parks, earnings call transcripts, social media sentiment, breaking news: AI can ingest all of it in real time and extract signals from sources that would have been invisible, or at least opaque a decade ago, even to the most advanced algorithm.
AI helps traditional algorithmic trading models move beyond constrained rule-based systems. AI models can learn and adapt, improving their efficiency and trades. The level of precision this produces marks a significant evolution from the rule-based algorithmic trading systems of the previous generation.
Humans: the often-forgotten driver of AI, and algorithmic trading
One element that is frequently omitted in the AI trading discussion, and arguably the most important, is the human.
Rotem Farkash, AI and trading expert weighed in on the subject, “AI models are only as good as the conditions and data they were trained on.”
Farkash argued, “Automated systems enable firms to operate far beyond traditional human capabilities; that is a fact. However, human judgment, and input, remains vital to AI and algorithmic trading, at least for the present.”
24/7 markets and operational edge
AI and algorithmic trading models have also changed the timeframe of trading. Your AI model or algorithm can place trades 24/5, or longer. Gone are the traditional 6.5-hour trading days in one geography or another.
AI also enables ‘round the clock’ support and market monitoring, increased liquidity and the ability to respond swiftly to price movements and global events.
AI Trading Risks: flash crashes
As seen with the huge swing in the S&P 500 in early April, AI’s introduction to trading is not without risks.
The Warsaw Stock Exchange (WSE) also suspended trading this month for over an hour after a surge of automated high-frequency orders triggered a feedback loop of bot-driven sell orders the exchange’s own systems could not contain.
Warsaw’s WIG20 index had plunged 7% before the plug was pulled. It took manual human intervention to restore order and the WSE subsequently vowed to review its algorithmic trading regulations entirely.
Regulators have responded more broadly too. In February 2026, ESMA issued a supervisory briefing identifying seven areas of increased oversight focus, with AI in trading featuring among them.
AI is here to stay in Finance and Trading
There is no doubt that AI is here to stay in trading and the case for its use is formidable. AI can extract signals from data that would have taken human analysts weeks to process. But it is not risk free.
For now, AI is only as good as the data and conditions it has been built on. What it looks like when that changes will be one the most consequential open questions in finance.
Read more:
AI Is Running 89% of Global Trading: Here is what you need to know
