The AI Revolution: A Market Game-Changer
The stock market is a battlefield, and the warriors are no longer just humans. Artificial Intelligence (AI) is taking over, and it’s not just about Nvidia and Microsoft anymore. It’s about the entire economy, and the winners and losers are being sorted out at a pace that’s both exhilarating and terrifying.
The Research That Shakes the Ground
A study titled “Generative AI and Firm Values,” conducted by Andrea L. Eisfeldt and Gregor Schubert of UCLA, along with Miao Ben Zhang of USC, is shedding light on the shock waves created by the release of the ChatGPT program. It’s not just a ripple; it’s a seismic shift.
Companies ripe for AI streamlining are not just adapting; they are thriving, beating the market. The Nasdaq 100’s 44% surge in 2023 is just the tip of the iceberg. Beneath the surface, the market is making broad judgments about automation’s impact on cash flows, stock valuation, and the very nature of production.
The New Industrial Revolution
Lawrence Creatura, a fund manager at PRSPCTV Capital, compares this shift to the industrial revolution. Machinery is taking over human tasks, and it’s not just a trend; it’s a transformation. But it’s not without its caveats. The shortness of the period available for review and the methodology used to determine AI-vulnerable jobs are points of contention.
The White-Collar Transformation
The AI chatbot, given access to a database of 19,000 workplace tasks, sent back a ranking of at-risk jobs, primarily in the white-collar realm. Finance, professional services, and tech are at the forefront of this transformation. The market has already sniffed this out, and companies in AI’s sights are outperforming by a statistically relevant margin.
The Impact on Stock Values
The arrival of ChatGPT has had a positive effect on firms with labor forces exposed to Generative AI. Chipmakers like Broadcom, Qualcomm, and Nvidia, along with Microsoft, are leading the charge. But it’s not just tech companies; insurance firms with higher exposure to generative AI are also experiencing higher share price gains.
A Productivity Increase, Not Job Replacement
The findings may sound like a harbinger of job replacement, but an alternate theory suggests a productivity increase. Large language models could perform cognitive grunt work, freeing humans for tasks that AI cannot handle. The result? More productive companies, retained jobs, and swelling share prices of AI-savvy firms.
The Best Tool for the Job
Ironically, researchers like Schubert are performing tasks primed for AI. ChatGTP completed the assigned task in less than two days at minimal cost. Schubert’s admission? “It just turned out to be the best tool for the job.”
