Market Expectations Price In 32.6% AI Productivity Surge for Engineers
Economists warn that investor optimism regarding AI-driven software engineering gains may outpace operational reality.
Investors are betting heavily on AI's ability to transform software engineering, pricing in a permanent productivity increase of 32.6%, as first reported by The Register.
Economists from the London School of Economics and Political Science (LSE) and the University of California, Berkeley (UCB) analyzed stock market shifts between November 2022 and December 2025 in a National Bureau of Economic Research paper titled "The Macroeconomic Effect of AI: Sizing the Software Engineering Channel." The researchers—Alex Blumenfeld (UCB), Jonathon Hazell (LSE), Chen Lian (UCB), and Andreas Schaab (UCB)—determined this figure by measuring how company stock returns responded to AI news relative to the proportion of payroll dedicated to software engineering.
While the 32.6% estimate aligns with other research showing 21-56% acceleration on individual tasks, the authors caution that these gains may be offset by operational bottlenecks. For example, a surge in commit figures could overwhelm code review processes, limiting overall productivity.
Chen Lian, an assistant professor of finance at UC Berkeley, told The Register that while this forward-looking measure provides real-time data, markets can be "overly optimistic or pessimistic." Despite these warnings, the researchers' economic model suggests that the market-implied productivity gains correspond to a permanent 3.61% increase in present-value GDP.