Egan-Jones: AI's First Casualties Will Be Services, VC, and Housing

US credit rating firm Egan-Jones predicts that AI disruption will first strike professional services, venture capital, and housing. The firm considers a broad economic transformation nearly inevitable.

The Oct. 1 report, named “It’s Over,” is aimed at institutional investors and risk managers, with Egan-Jones pointing out that it was not authored by credit analysts.

Where Does Egan-Jones Expect AI Disruption to Land First?

Professional services lead the ranking, as these firms bill clients for expertise on an hourly basis.

As proof, the report highlights Big Four network KPMG urging its auditor, Grant Thornton UK, to pass along savings from AI. According to the Financial Times, UK filings reveal the audit fee dropped by 14%, from $416,000 to $357,000.

It also references IBM, whose shares slid 13% on Feb. 23, the largest decline since 2000, per Bloomberg. Anthropic had claimed Claude Code could accelerate the modernization of COBOL, a language used for decades on banking mainframes.

Not every analyst saw a lasting impact. Evercore ISI maintained an Outperform rating on IBM following the decline, noting the company already offers its own modernization tools, as reported by Investing.com.

Venture capital is next in Egan-Jones's view. The firm argues that startups scaling with less capital reduce venture firms' leverage and returns.

It suspects few limited partners (LPs) — the investors who fund those firms — have accounted for this shift.

Can Lost Jobs Really Drag Down US Home Prices?

Egan-Jones observes that mortgaged households frequently depend on two incomes. A single job loss could trigger a sale within six to 12 months.

Prices already lag inflation. The S&P Cotality Case-Shiller national index gained 1.9% for the year through July, while consumer prices rose 3.4%, according to S&P data. Real values have declined for 14 consecutive months.

Meanwhile, Redfin data show sellers exceeding buyers by 57.9% in August, marking a record US home seller surplus.

The Kobeissi Letter, a markets newsletter, estimated AI-exposed sector job losses at around 11,000 monthly, the average for the three months ending in June.

Egan-Jones views the housing impact as temporary, expecting scarce city land to retain long-term value. The extent to which AI savings reach clients, as with KPMG, may determine how far margin pressure spreads.