AI Revolution and Crash Risks in Technology Stocks

Onur Polat (), Oguzhan Cepni (), Riza Demirer and Rangan Gupta ()
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Onur Polat: Institute of Informatics, Hacettepe University, Ankara, Turkiye
Oguzhan Cepni: Department of Economics, Copenhagen Business School, Porcelaenshaven 16A, Frederiksberg DK-2000, Denmark
Rangan Gupta: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

No 202617, Working Papers from University of Pretoria, Department of Economics

Abstract: This study extends the literature on the impact of technological shocks on stock market dynamics from a novel perspective in the context of the emerging AI revolution. Utilizing the recently developed AI indexes that capture general public attention towards AI-related developments through the newspaper coverage frequency of artificial intelligence and related topics like machine learning and high-frequency (5-minute interval intraday) data on technology stocks over the period from January 2015 to March 2026, we examine the predictive effect of AI sentiment and uncertainty proxies on crash risks in technology stocks that are directly associated with the emerging AI boom. Employing nonparametric causality-in-quantiles tests, we find that all three AI-related indexes significantly predict future crash risk in technology stocks, primarily during ``normal" and high-risk market states. Sign analysis via average derivatives reveals that general and economic AI shocks positively impact crash risk, while explicit uncertainty exhibits state-dependent characteristics at higher quantiles. These findings suggest that AI uncertainty acts as a behavioural amplifier of market tail risk, driven by investor attention and ``fear of missing out" (FOMO) dynamics.

Keywords: AI Uncertainty; Crash Risk; NASDAQ-100; Quantile Causality; Partial Average Derivatives; FOMO (search for similar items in EconPapers)
JEL-codes: C22 C53 G10 O33 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2026-06
New Economics Papers: this item is included in nep-ain and nep-fmk
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