The Artificial Intelligence Premium

Abstract

We study whether the Artificial Intelligence (AI) adoption is priced in the crosssection of US stocks. Firms with a higher level of adoption of AI exhibit higher stock returns. A one-standard deviation increase in the AI adoption level indicates an 18 basis-point increase in expected monthly stock returns. We study several economic channels. The positive AI premium is related to the slow realization of early AI investments and digital benefits. It is influenced by shifting investor perceptions of AI technology. The AI premium is associated with the market AI attention and technological adoption risk. The premium varies across sectors.

Keywords: Artificial Intelligence, Asset Pricing, Technological Innovations, Return Predictability, Fama-MacBeth Regression JEL Codes: G12, C51, G14

JEL Classification: G12, C51, G14