Investors are pricing in a 32.6% AI productivity boost for software engineers

A recent study from economists at the University of California, Berkeley and the London School of Economics and Political Science estimates that artificial intelligence will boost software engineering productivity by a permanent 32.6 percent between 2022 and 2025.

The researchers observed that investors have been pricing in these anticipated AI productivity gains into company valuations since the introduction of ChatGPT in November 2022. By analyzing stock market movements and the relationship between AI developments and software engineering payroll shares among firms, the researchers estimated that AI has increased the market's expected present value of software engineering productivity by 32.6 percent.

While acknowledging that market expectations may not fully materialize, the researchers argue that their forward-looking, real-time measure of AI's impact on productivity is valuable as many of its effects have yet to fully play out. Their productivity gain estimate is comparable to the 21-56 percent acceleration on individual tasks reported by other researchers.

If applied to the broader economy, the estimated AI-driven productivity gain could lead to a permanent 3.61 percent increase in GDP based on news about AI from November 2022 to December 2025. The authors suggest that their methods could be used to study the economic impact of AI through other channels in future research.