Market Dynamics in Response to AI Breakthroughs: (Early) Evidence from ChatGPT

Abstract

Major advancements in artificial intelligence (AI) have the potential to enhance productivity and generate wealth. This study investigates the stock returns of 20 leading AI-related companies surrounding three significant ChatGPT release dates: the initial release, GPT-4, and GPT-4o. Utilizing historical stock price data, we conduct event studies to assess the stock market responses. The analysis reveals substantial stock price changes associated with all three release dates. Notably, the GPT-4 release had the most pronounced effect, yielding a return of 6.66% and a t-stat of 5.98, signifying a strong impact on stock valuations. The initial release and GPT-4o also demonstrated significant changes, with returns of 3.94% and 4.55%, and t-stats of 3.07 and 4.47, respectively. These results indicate that major ChatGPT releases significantly influence the stock prices of AI-related companies, suggesting considerable financial market reactions to AI advancements.