Since its launch in November 2022, numerous authorities have raised concerns about the risks posed by OpenAI’s ChatGPT technology. In March, Italy’s Data Protection Agency took the extraordinary step of banning ChatGPT within the country over concerns about consent and personal data privacy.

Ironically, this one-month ban may have provided the strongest evidence to date of the technology’s transformative impact on business and the economy.

Capitalizing on this rare natural experiment opportunity, researchers at Olin Business School at Washington University in St. Louis and the National University of Singapore examined changes in the relative stock market valuation of Italian firms across multiple industries during the one-month ban to assess the ban’s consequences and generative AI’s overall value.

Their findings — published in a working paper, “Capital Market Consequences of Generative AI: Early Evidence from the Ban of ChatGPT in Italy,” — show the ban’s impact was twofold: Not only did the ban negatively impact firm productivity, it also impacted investor behavior.

Not since the introduction of the internet has a technology so quickly transformed how businesses operate and compete. What’s remarkable is that it’s easy and cheap to adopt, helping small, underdog businesses compete with much larger firms without making heavy investments in infrastructure or human capital.

Jeremy Bertomeu,
associate professor of accounting at Olin Business School

Measuring ban’s impact on businesses

Across the globe, businesses have leveraged AI generative technology to optimize processes that previously required significant labor and infrastructure support. Not surprisingly, the researchers found early adopters — including firms that provide professional, scientific and technological services — were hardest hit by Italy’s temporary ban.

According to the data, Italian firms in these high-exposure industries experienced an average negative return of 8.7% compared with similar European stocks during the monthlong ban.

They also found evidence that the ban had a greater impact on newer and small Italian businesses. Compared with larger, more established Italian businesses, these firms underperformed by 6.8-7.1%, respectively. 

“The negative market reaction indicates that new, small and tech-savvy businesses benefit the most from generative AI because it allows them to reduce the information advantages held by larger incumbent firms and narrow the competitive gap.”