Written by: Ben Leto
The days of artificial intelligence just being a helpful new technological upgrade are behind us. AI is now affecting productivity, corporate strategy, and financial market valuations. Firms are already adopting AI tools to help them with their day to day operations, and investors are expecting that AI will help to shape a new wave of economic growth (Citi, 2025). Articles from Citi, the IMF, and experts at EisnerAmper show how the emergence of AI and its positive impact on productivity will shift the dynamics of growth and the way companies are valued.
Productivity growth is one of the largest things that financial markets try to measure. Predicting how a company will perform in the long run helps to assign a more accurate valuation of said company. Through AI many firms are experiencing higher productivity. This higher productivity means lower production costs, higher potential output, and an increase in long run earnings. All of these factors contribute to a higher valuation because it boosts the present value of these future cash flows. In the article written by the Must C group we see that AI investment has drastically increased over the past few years. From $60 billion in the fourth quarter of 2023, to $255 billion in the second quarter of 2025. This increased investment shows the emergence of AI, and how firms do not want to fall behind the competition in this race. Many firms are trusting AI now because of its translation to higher valuations in the market, and its payoff in the form of higher productivity growth.
One of the most significant effects of AI is how effective it is at improving operational efficiency. Companies are using AI to automate time-intensive tasks, which can largely help with decision making in business practices. In the Eisner Amper article, written by Paren Knadjian, we see a specific example of this. “According to analysts at PrivCo, companies using AI-driven logistics enhancements achieve approximately 15% cost reductions, 35% inventory improvements, and 65% service-level gains (Knadjian, 2025).” Through the use of this AI-driven program used for creating routes on deliveries, these companies are able to cut costs on fuel and get their product where it needs to be faster. This increase in productivity due to the direct installation of AI also improves these companies’ valuation premiums. This is because it differentiates itself from other competitors who may not have yet adopted AI in its operations. This shows that AI is now becoming an immediate productivity tool that can affect a firm’s performance.
This introduction of AI may entice all firms to join in on implementing AI into their procedures. Climbing productivity at the same level of worker’s input sounds like an extreme positive of AI. Having the ability to increase your outputs without increasing your inputs is common with an upward shift in the supply curve due to this new technology. The IMF warns that there may be some risks associated with the use of similar AI technologies to perform menial tasks. Tobias Adrian, a financial counselor for the IMF in China, states that since these AI practices are different from what financial markets have used in the past, it may be difficult for lenders to adjust the amount of leverage they are willing to offer. This is because AI increases the market’s ability to react to new information and move quicker in doing so. Adrian also warns against AI potentially having a herding effect, where most AI will reach the same conclusion, and if that conclusion isn’t correct, it could have major consequences.
There is still a large gap between AI-adopting firms and those that lag behind. Firms that have embraced AI tend to show higher revenue per employee, lower marginal costs, and stronger earnings outlooks.These are all core drivers of valuation. Meanwhile firms that don’t embrace AI face rising relative costs and outdated workflows (Knadjian, 2025). This contributes to AI-adopting firms earning higher valuations, because they are more set up for the future in some sense. Investors seem to see AI capabilities almost as intellectual property. Something intangible that they have that sets them apart from other private firms. Many investors view this skill as a long term pro for these countries. This is what some analysts are calling the “AI valuation gap”.
Artificial intelligence is quickly becoming a very important tool for firms. Throughout its use as a technological tool, it is able to increase productivity. The increase in productivity then leads to an increase in valuation for these firms as well. Citi, the IMF, and EisnerAmper all point to the same reality, AI is transforming how firms operate. The widening AI-valuation gap shows that companies either need to embrace AI, or get left behind in the ever-changing world. As AI evolves, the firms that are able to effectively and efficiently use AI will capture the greatest gains in efficiency and market value. Those firms that hesitate will risk falling behind because they weren’t able to adapt. In the future, the use of AI to simplify gruntwork won’t just be useful. It will be essential for traversing the future of finance.
References
Adrian, T. (2024, September 6). Artificial intelligence and its impact on financial markets and financial stability [Speech]. International Monetary Fund. https://www.imf.org/en/news/articles/2024/09/06/sp090624-artificial-intelligence-and-its-impact-on-financial-markets-and-financial-stability
Citi Research. (2025, September 15). Productivity & the AI revolution: Implications for the economy and markets. Citi. https://www.citigroup.com/global/insights/productivity-the-ai-revolution-implications-for-the-economy-and-markets
Google. (2025). Image results for “ai checker” [Image]. Retrieved November 20, 2025, from https://www.google.com/imgres?q=ai+checker&imgurl=https%3A%2F%2Faqua-cloud.io%2Fwp-content%2Fuploads%2F2025%2F04%2FHow-to-become-an-AI-software-engineer-tester.jpg
Knadjian, P. (2025, September 18). How AI is shaping the valuation of private companies. EisnerAmper. https://www.eisneramper.com/insights/artificial-intelligence-insights/artificial-intelligence-and-private-company-valuations-0925