Do Markets Believe in Transformative AI? (marginalrevolution.com)

A new working paper from the National Bureau of Economic Research (NBER), authored by Isaiah Andrews and Maryam Farboodi, explores how the release of major AI models in 2023-2024 has impacted US bond yields. The study reveals that these technological advancements have led to significant declines in long-term Treasury, TIPS, and corporate yields, suggesting that the market is adjusting its expectations about future economic growth. Specifically, the findings indicate a downward revision in expected consumption growth and a reduced perceived risk of extreme economic outcomes, such as existential threats or a post-scarcity economy. This research holds substantial significance for the AI/ML community as it quantitatively connects the release of transformative AI technologies with macroeconomic indicators, suggesting that financial markets may be aligning their expectations with the potential economic impact of AI innovations. By demonstrating that interest rates are responsive to technological advancements, the paper highlights the broader implications of AI in shaping economic policy and investor sentiment in a rapidly evolving technological landscape. The results challenge traditional beliefs, showing that uncertainty relating to consumption growth may not be driving these shifts, thus inviting further exploration into how AI technologies influence financial markets.