From VoxEU, June 4:
Generative AI models can process complex inputs and generate human-like outputs, making them more versatile and scaleable. Using a unique firm-level measure of exposure to generative AI, this study explores the effect of the public release of ChatGPT on equity returns at the firm level. ChatGPT had a sizeable positive effect on the value of firms whose labour forces are more exposed to generative AI. Occupations involving non-routine cognitive analytical tasks or routine cognitive tasks exhibit the highest exposure to generative AI, while manual physical tasks are relatively unaffected.
Recent advancements in generative artificial intelligence (AI) have sparked significant interest due to their potential to revolutionise various industries. Compared to previous AI models, generative AI models possess the ability to process complex inputs and generate human-like outputs, making them more versatile and scalable. This has led to widespread anticipation of their adoption in the corporate sector, with potential implications for firm values.
A key question is what effect these technologies will have on corporate valuations as a result of the impact of generative AI on firms’ labour inputs. The answer can help company managers better prepare for the new technology’s impact on their firms and guide investors to allocate resources more efficiently across firms.
A major obstacle to answering this question is that measuring firms’ exposure to a new technology in real-time can be challenging. In particular, as the new technology unfolds, one would need a tremendous amount of knowledge to assess what types of labour and firms are most exposed to a new technology. Indeed, researchers typically rely on crowdsourcing such knowledge and study the impact of technologies in retrospect, when enough knowledge has accumulated.
Our approach
In a recent paper (Eisfeldt et al. 2023), we leverage the superior information-gathering and processing power of ChatGPT to evaluate whether the tasks performed by different occupations can be executed or improved by generative AI’s current or future capabilities. Merging this measure with a dataset of firms’ occupational composition provided by Revelio Labs, we capture the potential of generative AI to enhance or replace the tasks performed by labour at these firms. This two-step approach enables us to create a comprehensive firm-level measure of exposure to generative AI, which, to the best of our knowledge, is the first of its kind.Our labour-based measure of firms’ exposure to generative AI is validated using firms’ earnings call transcripts in 2023. We observe a strong relationship between exposure to generative AI and firms’ discussions of this technology. Moreover, we find that firms with higher exposure do not merely discuss common technological topics but specifically address the impact of generative AI on their operations, including labour inputs. These results suggest that firms are recognising the broader implications of generative AI beyond its effect on products and are actively incorporating it into their strategic considerations. Table 1 lists the US firms with the top and bottom workforce exposure to generative AI. IBM, Intuit, and Nvidia rank at the top of the exposure, while Starbucks, Walmart, and UPS rank at the bottom.
Table 1
Equipped with this firm-level measure, we study the impact of the public release of ChatGPT – a major event in the advancement and dissemination of generative AI technology – on equity returns at the firm level....
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