The London Stock Exchange is home to a vast collection of businesses operating across a wide number of industries. But like every stock market, not all of these companies end up delivering on expectations. And there are plenty of examples of UK shares being exceptionally volatile.
Needless to say, investors with a low risk tolerance need to filter out these riskier opportunities if they want to build a stable portfolio. And zooming in on the FTSE 100 is a good step towards achieving this goal. After all, these are the biggest and best businesses in Britain, often dominating their industries. But which ones make for the safest investment in 2025?
That’s the very question I put forward to ChatGPT to see what an artificial intelligence (AI) model would recommend to investors right now.
ChatGPT’s ‘safe’ stock picks
Like most investment advisors, ChatGPT recommended focusing on the sectors that are less prone to cyclical swings. This includes healthcare, utilities, consumer staples, telecommunications, and insurance. These defensive industries don’t tend to be very sensitive to the economic cycle. Why? Because regardless of what inflation, interest rates, or GDP growth might be, demand in these sectors tends to remain robust.
The London Stock Exchange has a good selection of companies operating in these spaces. But ChatGPT’s favourites are National Grid, Unilever, AstraZeneca, Legal & General, and BT Group (LSE:BT.A).
On the surface, these businesses seem to be fairly ‘safe’ in terms of share price volatility. With the exception of Legal & General, the betas are relatively low. And with market capitalisations ranging from £13bn to £160bn, they’re all proven large-cap enterprises with dominant positions within their respective industries.
Having said that, none are risk-free, even AstraZeneca, which is currently the largest company listed on the London Stock Exchange.
Digging deeper
Let’s zoom in on BT Group. Over the last 12 months, the UK telecommunications giant’s been a pretty stellar performer, with its share price climbing almost 65%. This has been driven primarily by CEO Allison Kirkby’s transformation programme that’s delivering multi-billion-pound annual savings, paving the way for superior free cash flow generation.
That means more money’s available to pay down borrowings and improve IT infrastructure efficiency. However, the group’s debts remain substantial, along with a pretty large employee pension deficit that’s dragging down net profitability.
At the same time, while cost savings are slowly repairing operating margins, revenue growth remains elusive. In fact, over the last five years, BT’s top line has actually been shrinking as competitors chip away at its market share.
The other businesses on this list also have their weak spots. National Grid’s undergoing a similar financial restructuring, Unilever’s premium products are facing stiffer competitive pressures from cheaper alternative brands, and AstraZeneca is continuously navigating a complex and expensive regulatory environment. As for Legal & General, its asset management arm seems to be struggling to hold on to customers with substantial client cash outflows.
With that in mind, blindly investing in stocks that an AI model thinks are safe likely isn’t a prudent investing approach. While ChatGPT can be a useful tool, investors still need to spend time digging into the weeds and discovering whether the risk matches the potential return. I’m not buying.
