Market Valuations Price In 32.6% AI Productivity Jump for Engineers

Investors are betting heavily on AI's ability to transform software engineering, pricing in a permanent productivity increase of 32.6%, according to reporting from The Register.

Researchers from the London School of Economics and Political Science (LSE) and the University of California, Berkeley (UCB)—specifically Alex Blumenfeld, Jonathon Hazell, Chen Lian, and Andreas Schaab—detailed these findings in a National Bureau of Economics Research paper. The team analyzed stock market movements between November 2022 and December 2025 to determine how company valuations responded to AI news relative to the size of their software engineering payrolls.

While this market-implied gain aligns with other research showing 21-56% acceleration on individual tasks, the UCB and LSE economists caution that these gains may not fully materialize. Chen Lian, a UCB assistant professor of finance, noted that markets can be overly optimistic. Furthermore, the researchers warned that task-level productivity can be neutralized by operational bottlenecks, such as code reviews failing to keep pace with an increase in commit figures.

From a macroeconomic perspective, the researchers' model suggests that the AI-driven productivity expectations from November 2022 to December 2025 correspond to a permanent present-value GDP increase of 3.61%.