The Impact of Generative AI Announcements on Suppliers: Evidence From the Stock Market

The rise of generative AI (GenAI) technology is revolutionizing firm operations and supply chain management, profoundly influencing firms within the GenAI supply chain network. While a few emerging studies have explored the impact of GenAI initiatives on firms’ stock performance, it remains unclear how such disruptive technology initiatives affect the stock price movements of their supply chain partners. This paper empirically investigates the impact of firms’ GenAI initiatives on the abnormal stock returns of their suppliers by analyzing data on news, supply chain relationships, and daily stock prices. The analysis indicates that, on average, a firm's GenAI announcement leads to a positive abnormal return of 0.27% for its suppliers on the announcement day, with additional evidence of sustained long-term value creation. Heterogeneity analyses reveal that this spillover effect is more pronounced among suppliers with higher R&D intensity, stronger sales growth, closer geographic proximity to the focal firm, and operations in less competitive industries. Furthermore, the positive abnormal returns are significantly greater when the GenAI initiative pertains to product innovation rather than process improvement. Our findings have important implications for supply chain stakeholders navigating the adoption of GenAI technologies.