Market Beliefs about Open vs. Closed AI

TL;DR

This paper investigates how market expectations about open versus closed AI models influence bond yields, revealing that open and closed AI releases have opposite effects on long-term interest rates, indicating differing economic implications.

Contribution

It extends previous analysis by comparing market reactions to open AI models with those to proprietary closed models, highlighting their distinct impacts on bond yields.

Findings

Open AI model releases lead to increased bond yields.

Closed AI model releases lead to decreased bond yields.

Market expectations differ significantly between open and closed AI models.

Abstract

Market expectations about AI's economic impact may influence interest rates. Previous work has shown that US bond yields decline around the release of a sample of mostly proprietary AI models (Andrews and Farboodi 2025). I extend this analysis to include also open weight AI models that can be freely used and modified. I find long-term bond yields shift in opposite directions following the introduction of open versus closed models. Patterns are similar for treasuries, corporate bonds, and TIPS. The different movements suggest that that markets may anticipate open and closed AI advances to have different economic implications, and that the cumulative impact of AI releases on bond yields may be more muted.