The frenzy over AI has led to outsized gains for investors this year, but this investor has taken the trend to the next level: using an AI model to select a basket of stocks that are due for a fall.

In an interview with BNNBloomberg on Thursday, Eric Jackson,  founder and president at EMJ Capital says his company’s in-house AI model has identified three overvalued names that are prime candidates to sell short.


Former meme stock Gamestop tops the list. “Obviously, this one has been in a prolonged downturn, some would argue it would therefore be due to go up, but with the trends we’re seeing there could be more pain ahead,” Jackson said. The company sold off on disappointing earnings this week, and EMJ says there could be more to fall. “Certainly, with the layoffs, closures and the difficulty they’re having with the old-school store business model, it doesn’t give much confidence. The stock can continue to drift down over the next couple months,” Jackson noted, agreeing with his model.


Boston-based Toast Inc. was another name Jackson’s AI model identified as a short-selling opportunity. The company makes point-of-sale devices and cloud-based management software for restaurants.  

“Toast at US $23 is definitely at the upper-end of the trading channel it’s been in since it [went public] It’s had a nice response to recent positive earnings so I think it’s at a point where our model is saying it’s time to take some profit or short it,” said Jackson. “They’re not ‘toast’,” he jokes, but for now, the AI is saying the upside is limited.

PENN Entertainment

The last name the model called a short was PENN Entertainment Inc., a U.S.-based entertainment company and casino gambling operator. “The model is telling us there’s more downside for the stock,” Jackson noted.  In August 2023, PENN Entertainment made US$2 billion deal with Disney’s ESPN, tying the house of mouse in with PENN’s sports betting services.   “They’ve made a deal to help Disney and I think people are questioning the economics of that particular deal. There’s been some articles recently on how addictive sports betting is, I’m long on DraftKings but Penn has had a more challenging strategy and it’s time to go short,” said Jackson.

Why AI stock-picking is not more popular

When asked why everyone is not using in-house AI to pick stocks, Jackson says it’s a tough system to crack. “I’ve gone through my own growing pains with my engineering team in ramping this up, so I’m not surprised it’s taking some time,” for others to adopt similar systems, he said.

However, he is confident AI-guided algorithms are the future of investing.

“This is where the world is moving. I would rather go through the trials and tribulations from learning from the mistakes and the challenges that come with it now to hopefully surf the wave on the other end and get all the benefits from when we find the models that are the most successful,” said Jackson.

His company, EMJ Capital, believes artificial intelligence systems can better construct a tech portfolio than humans can. “We have built our organization to reflect that belief," he said.