Artificial Intelligence, Human Capital Risk and Household Portfolio Choice

For most households, human capital is the largest asset they own, and rapid advances in artificial intelligence (AI) may change its value. This paper studies whether workers whose occupations are more exposed to AI use financial and labor markets to hedge this risk, by investing in firms that gain from the new technology. We develop a portfolio-choice model with nontradable human capital in which AI-related equity pays off in states where exposed workers’ labor income falls through technological unemployment. The model predicts that more exposed workers should hold more equity, especially when human capital is large relative to financial wealth. We test these predictions using linked Norwegian administrative data on workers’ occupations, employers, income, wealth, and equity holdings. Workers in more AI-exposed occupations are more likely to participate in equity markets and, conditional on participation, hold more equity, especially from firms located in countries with firms more exposed to the AI boom. The exposure–equity relationship is stronger for younger workers, consistent with life-cycle hedging. Following the release of ChatGPT, workers with greater AI exposure also become more likely to move into lower-exposure industries and senior management roles. Our results highlight a channel through which financial markets may partially insure workers against technological unemployment.