Do Markets Believe in Transformative AI?

Isaiah Andrews and Maryam Farboodi

No 34243, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Economic theory predicts that transformative technologies may influence interest rates by changing growth expectations, increasing uncertainty about growth, or raising concerns about existential risk. Examining US bond yields around major AI model releases in 2023-4, we find economically large and statistically significant movements concentrated at longer maturities. The median and mean yield responses across releases in our sample are negative: long-term Treasury, TIPS, and corporate yields fall and remain lower for weeks. Viewed through the lens of a simple, representative agent consumption-based asset pricing model, these declines correspond to downward revisions in expected consumption growth and/or a reduction in the perceived probability of extreme outcomes such as existential risk or arrival of a post-scarcity economy. By contrast, changes in consumption growth uncertainty do not appear to drive our results

JEL-codes: E43 E44 G1 G12 G14 O30 O4 (search for similar items in EconPapers)
Date: 2025-09
New Economics Papers: this item is included in nep-ain, nep-ifn and nep-inv
Note: AP EFG
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