Generative AI and Firm Values

Abstract

What are the effects of recent advances in Generative AI on the value of firms? Our study offers a quantitative answer to this question for U.S. publicly traded companies based on the exposures of their workforce to Generative AI. Our novel firm-level measure of workforce exposure to Generative AI is validated by data from earnings calls, and has intuitive relationships with firm and industry-level characteristics. Using Artificial Minus Human portfolios that are long firms with higher exposures and short firms with lower exposures, we show that higher-exposure firms earned excess returns that are 0.4 ppt higher on a daily basis than returns of firms with lower exposures following the release of ChatGPT. Moreover, we show that hiring activity by more exposed firms decreases after the ChatGPT release and shifts away from more exposed occupations, which, in turn, see relative wage declines at the national level, consistent with the substantive disruptive potential of Generative AI technologies. .

Keywords: Artificial Intelligence, Generative AI, Chat GPT, Corporate Valuations, Equity Returns, Technological Change

JEL Classification: G00, E00, J24, O31