People might be buying AI stocks as a financial insurance policy against a future where machines take all the jobs.
April 23, 2026
Original Paper
Hedging the Singularity
arXiv · 2604.16997
The Takeaway
The current high prices for AI companies may not be based entirely on their current earnings. Investors appear to be using these stocks as a hedge against a singularity that would displace human labor and consumption. We usually assume that stock market bubbles are driven by simple hype or unrealistic growth expectations. This theory suggests that the bubble is actually a rational response to an existential economic risk. Owning a piece of the AI means having a claim on the future of an economy where human work no longer has value.
From the 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 cost