AI selloff read: Pástor-Veronesi model says tech revolutions end in systematic-risk repricing
BenBajarin · x · 2026-11-06
Amid the AI stock selloff, Ben Bajarin points to the 2009 AER paper "Technological Revolutions and Stock Prices" by Pástor & Veronesi.
- Core idea: prices of innovative firms fall once a technology becomes big enough that its risk shifts from idiosyncratic to systematic — even when demand data remains fine.
- The general-equilibrium model shows stock price "bubbles" during technological revolutions, driven by uncertain average productivity that gets resolved through learning.
- These bubbles are observable ex post but unpredictable ex ante, and are most pronounced for technologies with high uncertainty and fast adoption.
- The framework reframes today's AI correction as systematic-risk repricing rather than deteriorating fundamentals.
Related event: Druckenmiller Warns AI Buildout Echoes 1873 Railway Bubble(2 posts)→
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