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Impact of AI on Stock Valuations

July 7, 2023 • Posted in Fundamental Valuation

How do recent advances in Generative Artificial Intelligence (AI), as epitomized by ChatGPT, impact firm valuations? In their May 2023 paper entitled “Generative AI and Firm Values”, Andrea Eisfeldt, Gregor Schubert and Miao Ben Zhang quantify workforce exposures to AI for publicly traded U.S. companies and translate those exposures into firm valuation effects. Specifically, they:

  1. Measure job task AI exposures by asking ChatGPT to assess whether each of 19,265 occupational tasks could be done by the current ChatGPT or an enhanced future ChatGPT.
  2. Measure occupational AI exposures by aggregating task-level AI exposures to occupations per the O*NET database.
  3. Measure firm AI exposures by mapping occupations to publicly-traded firms based on millions of public employee profiles such as those in LinkedIn using data from Revelio Labs. They validate this measure based on mentions of AI in 2023 company earnings announcement call transcripts.
  4. Quantify effects of AI exposure on firm valuations by examining how stocks of firms with varying exposures to AI react to the release of ChatGPT on November 15, 2022.

Using occupational task descriptions, firm employee job descriptions and returns of associated stocks from ChatGPT release through March 31, 2023, they find that:


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