Egan-Jones Maps Where AI Disruption Hits First: Services, Venture Capital, Housing

Egan-Jones, a US credit rating firm, says AI disruption will hit professional services, venture capital and housing first. It regards a broad economic overhaul as virtually assured.

The firm’s Oct. 1 report, titled “It’s Over,” targets institutional investors and risk managers. Egan-Jones notes that credit analysts did not write it.

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

Professional services top the list because those firms bill clients for expertise by the hour.

As evidence, the report cites Big Four accounting network KPMG pressing its auditor, Grant Thornton UK, to share AI savings. UK filings show the audit fee fell 14%, from $416,000 to $357,000, the Financial Times reported.

It also points to IBM, whose shares fell 13% on Feb. 23, the steepest drop since 2000, according to Bloomberg. Anthropic had said Claude Code could speed up modernization of COBOL, a decades-old language used on banking mainframes.

Not every analyst saw lasting damage. Evercore ISI kept an Outperform rating on IBM after the drop. It noted IBM already sells its own modernization tools, per Investing.com.

Venture capital follows, in Egan-Jones’s telling. The firm reasons that startups scaling on less capital leave venture firms with less leverage and lower returns.

It suspects few limited partners (LPs), the investors who fund those firms, have priced that in.

Can Lost Jobs Really Drag Down US Home Prices?

Egan-Jones notes that households with mortgages often rely on two paychecks. One job loss could prompt a sale within six to 12 months.

Prices already trail inflation. The S&P Cotality Case-Shiller national index rose 1.9% in the year to July. Consumer prices climbed 3.4%, S&P data show. Real values have fallen for 14 straight months.

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

The Kobeissi Letter, a markets newsletter, put AI-exposed sector job losses at about 11,000 a month. That was the average over the three months to June.

Egan-Jones frames the housing hit as short-term and expects scarce city land to hold its long-run value. How much AI savings reach clients, as at KPMG, may decide how far margin pressure spreads.