Important Warning: AI Is Coming for Your Portfolio — Unless You Own Real Estate

For the past year, Wall Street and Silicon Valley have largely agreed on one thing: artificial intelligence is going to supercharge corporate profits. The narrative is everywhere. AI will automate workflows, reduce labor costs, boost productivity, and drive margin expansion. In this version of the future, nearly every company becomes more efficient, earnings grow rapidly, and stock valuations soar.

But what if this is wrong?

What if AI doesn’t lift all boats, but instead sinks most of them?

I believe that’s exactly what’s happening—and I’m already seeing it firsthand. As someone who runs a business that depends on content creation and research, I’ve experienced the negative impact of AI directly. Many close friends in other industries are seeing the same trend play out: increased competition, lower pricing power, and rapidly eroding moats. What we’re living through is likely just the early stage of what will affect nearly every business model in the economy.

In this article, I’ll explain why the common view of AI as a universal profit booster is flawed. I believe the opposite is more likely: that AI will lead to margin compression, deflation, and one of the largest wealth transfers of the century. Not just a few sectors, but the majority of businesses (and their stocks) will suffer. But there is one sector that could emerge as an unlikely winner: real estate.

Let’s explore why.

The Bullish Narrative: AI Will Boost Profits for Everyone

It sounds logical at first. AI reduces the cost of doing business. It automates repetitive tasks, replaces expensive labor, and accelerates workflows. Less headcount, faster output, fewer mistakes. Companies can do more with less.

Why wouldn’t profits go up?

Here are the typical assumptions:

• AI reduces costs → profit margins expand

• Productivity increases → revenue per employee rises

• Time savings → faster growth and innovation

• Headcount reductions → leaner operations

It’s the ultimate corporate dream: an always-on, zero-cost knowledge worker army.

But this dream ignores one key truth about economics and markets:

When everyone gets more efficient, no one gains a lasting edge.

Let’s dive into the reality.

The Bearish Reality: Why AI Will Hurt Most Businesses Over Time

1. AI Lowers Barriers to Entry

Historically, successful businesses relied on moats:

• Capital (hard to raise)

• Talent (hard to recruit)

• Infrastructure (hard to build)

• Brand (hard to replicate)

AI blows holes in all of them.

Today, a solo founder with ChatGPT and a no-code builder can:

• Launch a SaaS product

• Write their own marketing copy

• Design a website

• Run ads

• Build workflows

What once took $500,000 and a 10-person team now takes a weekend and an AI assistant.

Result: A flood of new competitors entering every industry.

This isn’t limited to tech startups. Every industry—from law to design, marketing, accounting, architecture, healthcare, education, and retail—is becoming saturated with smaller, faster, AI-enabled competitors.

Take my investment newsletter business as an example. Before AI, producing high-quality market commentary required a certain level of research skill, insight, and the ability to write clearly and consistently. The act of writing itself was a major barrier since most people simply aren't capable of creating thoughtful content at volume. That scarcity gave serious writers a real advantage.

But with AI, anyone can generate 100 articles in minutes. They may not be great, but they’re good enough and often indistinguishable to the average reader. This has unleashed a tidal wave of content online, saturating every niche. Attention hasn’t grown, but the volume of content chasing it has exploded by orders of magnitude.

The same dynamic will play out across nearly every industry.

AI has demolished traditional barriers to entry. It’s now easier than ever to start almost any kind of business. And as competition intensifies across the board, profits will shrink. What once was a moat is now just noise, and that shift will redefine value creation in the years ahead.

2. More Competition = Price Pressure = Margin Compression

When supply rises and demand stays constant, prices fall. If 50 AI-powered copywriting tools enter the market, the price of copywriting drops. If 100 legal startups offer $10 contract reviews, law firms can’t charge $500 for the same service.

Even if businesses become more efficient, they are forced to pass on the savings to customers to stay competitive.

The result? Revenue falls faster than costs, and margins shrink.

This isn’t just theory. We’ve seen it before:

• The internet made it easy to start media companies → media became free → publishers lost pricing power

• E-commerce increased product choice → brands lost pricing power → retail margins fell

AI is a force of radical deflation, and it’s coming for every industry.

It’s not just media or advertising. It's nearly every sector of the economy that relies on human labor, information, or routine decision-making.

3. Commoditization of Businesses

Industries once protected by human expertise are now at risk:

• Legal firms

• Advertising agencies

• Financial advisors

• Consultants

• Accountants

• Educators

• Healthcare providers

AI can:

• Draft contracts

• Write ad copy

• Build portfolios

• Generate strategies

• Diagnose symptoms

• Analyze financials

When everyone has access to world-class knowledge and output generation, differentiation disappears. That means brand loyalty fades, competition increases, and pricing power vanishes.

Even worse, AI tools are improving at an exponential speed. The value of human work is being set against a benchmark of free, instant, and good enough.

This trend will not remain contained. Over time, nearly all businesses that rely on human knowledge and service delivery will be exposed to this pressure.

4. AI Makes Platforms and Interfaces Replaceable

Platforms like Uber Eats, Google Search, Expedia, and others are aggregators. They make money by standing between the user and the service.

But in an AI-first world, you don’t open Uber Eats. You just say:

“Hey AI, order me the healthiest and best rated Thai food nearby with the lowest delivery fee.”

AI contacts the restaurant directly.

• No app.

• No middleman.

• No ad to click.

Result: Uber Eats becomes an API, not a business.

Google faces this threat too. Why search for the best air purifier when your AI assistant already knows your preferences and gives you the best option? The more powerful AI becomes, the fewer decisions we make. And that’s terrible for these platforms.

This logic applies more broadly. Booking platforms. Comparison tools. Digital marketplaces. Many will be commoditized or bypassed entirely.

5. Deflation Reduces Corporate Pricing Power Across the Economy

If AI leads to deflation, as many macro strategists now argue, then:

• Prices drop

• Revenues shrink

• Wages fall

• Corporate pricing power evaporates

Yes, costs fall too. But you can’t cut your way to long-term profit growth if revenue is collapsing faster.

This is what deflation does: it creates a world where customers expect more for less, and companies fight over increasingly smaller slices of pie.

Even large, well-established businesses will not be immune. As AI-driven deflation sets in, most companies will find it harder to maintain growth, margins, or pricing power.

Examples: How AI Could Hurt Real Businesses

Real Estate Platforms

Zillow and Redfin built businesses on search and lead generation. But an AI home-buying assistant could:

• Analyze market data

• Contact agents directly

• Optimize timing, financing, and closing

Result: The AI becomes the interface. Zillow becomes infrastructure. Margins collapse.

Creative Agencies

AI can already generate:

• Commercials

• Logos

• Product packaging

• Social media campaigns

If every small business can create great marketing with AI, agencies become commoditized. Pricing power disappears.

Retail and Consumer Brands

AI tools allow consumers to easily compare prices, read reviews, and automate purchasing decisions. Brand loyalty declines, private label and generics rise, and consumer-facing companies lose pricing power.

Any new competitor can also instantly generate high-quality marketing, product descriptions, and customer support, erasing the traditional advantages of scale, legacy brand, or large teams.

Professional Services

From tax prep to HR to market research—AI can do it all. Cheaper. Faster. And often better.

This is not a niche problem. This is a universal trend. Almost all businesses will be impacted. Only a handful with unique moats, proprietary infrastructure, or physical asset leverage will avoid the pressure.

So Who Actually Wins in This World?

A small handful of companies:

• Infrastructure providers: NVIDIA (chips), Microsoft & Amazon (cloud), OpenAI (models)

• Monopoly data owners: Google, Bloomberg, S&P Global, healthcare networks

• Physical asset holders: especially in real estate

The Real Estate Angle: A Hidden Winner

At first, it may seem like real estate has nothing to do with AI. But if you follow the logic of AI-induced deflation, margin compression, and capital rotation, the conclusion becomes clear:

Real estate could be one of the biggest beneficiaries of the AI revolution.

Here’s why.

1. AI Can't Replace Land

You can clone code. You can scale services. But you can’t make more irreplaceable land. Especially in:

• Urban cores

• Innovation hubs (SF, Seattle, etc.)

• Entitled, zoned, built-out areas

AI may make digital assets cheap. But location stays scarce.

2. AI = Deflation = Lower Interest Rates = Lower Cap Rates

AI is an inherently deflationary force. It reduces costs, automates labor, and floods markets with abundant supply, from content to services to code. Over time, this will lead to structurally lower prices, weaker wage growth, and persistent deflationary pressure across the economy.

In response, central banks will be forced to act. Just like during past deflationary periods, we’re likely to see:

• Lower interest rates — potentially near zero again

• Easier monetary policy and liquidity injections

• A surge in capital chasing yield

And what benefits most in a low-rate world? Real estate.

Lower rates compress cap rates, boosting property values. As income becomes scarce, yield-producing assets like real estate become increasingly valuable, not just as investments, but as anchors of portfolio stability. AI may disrupt every digital business model, but it could reignite the bull case for physical, cash-flowing property.

3. AI Leads to More Business Formation = More Space Demand

As AI makes it easier to launch businesses, more people will:

• Start companies

• Freelance

• Create AI-native products

They’ll still need:

• Data centers

• Warehouses

• Labs

• Offices

• Fulfillment space

More companies = more demand for physical infrastructure.

4. Real Estate Becomes a Store of Value — And the Anti-AI Asset

In a world where businesses are losing pricing power, digital goods are infinitely replicable, and margins are under constant threat from AI, investors will look elsewhere to protect capital. And increasingly, they’ll look to real estate.

Why? Because real estate offers what AI cannot:

• Tangible scarcity

• Stable, inflation-linked cash flows

• Physical presence in a virtualizing world

As the AI-driven deflationary trend deepens, many stocks will suffer — not from cyclical weakness, but from structural, ongoing margin erosion. Investors will begin to realize that traditional equity portfolios no longer offer the same security they once did. Real estate, by contrast, may start to be seen not just as a diversifier, but as the defensive core of a portfolio.

In that context, real estate becomes the anti-AI asset — the last bastion of scarcity, yield, and real-world relevance. And as capital flows in, chasing a finite supply of high-quality properties, it will drive:

• Cap rates lower

• Valuations higher

• Institutional allocations larger

The very forces that compress profits across digital industries may end up amplifying returns for select real estate assets, especially those in data centers, urban multifamily, life sciences, and other high-demand sectors.

In this world, real estate doesn't just survive the AI era.

It becomes the shelter from it.

Conclusion: Think Differently About AI

The dominant narrative is that AI will boost profits across the board. But a deeper look reveals a different story, and I can see it because of how it is already affecting my business and that of close friends:

• AI removes barriers, floods markets, and makes expertise abundant

• That abundance destroys pricing power

• Margin compression follows

• A few infrastructure players win big, but the majority of companies across most sectors will face long-term headwinds

And in the chaos, capital looks for safety. Scarcity. Yield.

That’s real estate.

The AI age may not be about which stocks you buy. It may be about owning the land where the AI runs, stores its data, and delivers its goods.

If you believe AI will change the world, ask yourself: what can’t it replicate?

Then invest there, because in a world of digital abundance and collapsing margins, the value of tangible, income-generating, irreplaceable assets could rise dramatically.

Real estate won’t just survive the AI era. It could gain enormous value because of it.

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Analyst's Disclosure: I/we have a beneficial long position in the shares of all companies held in the CORE PORTFOLIO, RETIREMENT PORTFOLIO, and INTERNATIONAL PORTFOLIO either through stock ownership, options, or other derivatives. High Yield Landlord® ('HYL') is managed by Leonberg Research, a subsidiary of Leonberg Capital. All rights are reserved. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. The newsletter is impersonal and subscribers/readers should not make any investment decision without conducting their own due diligence, and consulting their financial advisor about their specific situation. The information is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The opinions expressed are those of the publisher and are subject to change without notice. We are a team of five analysts, each contributing distinct perspectives. Nonetheless, Jussi Askola, the leader of the service, is responsible for making the final investment decisions and overseeing the portfolio. We do not always agree with each other and an investment by Jussi should not be taken as an endorsement by other authors. Past performance is no guarantee of future results. Our portfolio performance data is provided by Interactive Brokers and believed to be accurate but its accuracy has not been audited and cannot be guaranteed. Our portfolio may not be perfectly comparable to the relevant index. It is more concentrated and may at times use margin and/or invest in companies that are not typically included in REIT indexes. Finally, High Yield Landlord is not a licensed securities dealer, broker, US investment adviser, or investment bank. We simply share research on the REIT sector.