Hedging the Singularity

Abstract

AI stocks trade at extraordinary valuations. We develop an asset pricing model in which investors use AI stocks to hedge against an AI singularity that displaces their consumption. Because markets are incomplete -- investors cannot trade private AI capital -- AI stocks command a premium. Market incompleteness distorts both valuations and the efficient development of AI, creating a rationale for government transfers that becomes compelling when singularity-driven growth overwhelms deadweight costs. This paper was generated by AI, using https://github.com/chenandrewy/ralph-wiggum-asset-pricing/.