Alphabet(US:GOOG) Guoxin Securities·2025-11-18 08:14Core Insights - The integration of AI with prediction markets is transforming them from niche tools into mainstream financial infrastructure, as evidenced by Google's incorporation of real-time data from platforms like Polymarket and Kalshi into its search engine and financial products [2][3] - AI's ability to process and analyze vast amounts of unstructured information complements the prediction market's mechanism of aggregating crowd-sourced insights into probabilistic forecasts, creating a new paradigm in financial analysis [3][7] Group 1: AI Empowering Prediction Markets - The combination of AI and prediction markets democratizes access to complex financial insights, allowing users to query real-time market odds through natural language on platforms like Google Finance [4][11] - AI serves as an oracle that enhances the efficiency of prediction markets by providing structured methodologies for decision-making, ensuring transparency and traceability in the reasoning process [7][9] - AI tools are being developed to systematically identify and exploit pricing inefficiencies in prediction markets, significantly improving market efficiency through strategies like market rebalancing arbitrage and combination arbitrage [12][13] Group 2: Practical Outcomes of AI in Event Prediction - Empirical analysis from the London School of Economics indicates that arbitrage opportunities exist within prediction markets, with estimated total profits of approximately $39.6 million from April 2024 to April 2025 [19][22] - The majority of arbitrage activities are dominated by automated trading systems, highlighting the importance of algorithmic trading in capturing these opportunities [22][24] - AI's predictive accuracy varies by event type, performing best with discrete events that have clear outcomes, while facing challenges with complex political events and time-sensitive queries [26][28]