Generative AI and the Deflationary Threat: 20 Questions Every Public Company Will Need to Answer for Investors in 2025

On Competitive Advantage & Moats

1. How do you expect generative AI to alter your economic moat, and what impact will this have on your pricing power and long-term margins?
2. Do you view generative AI as a sustaining innovation within your sector, or a disruptive force that will erode industry-wide returns on capital?
3. How are you adjusting your cost of capital estimates in your internal valuation models, given the margin compression risk from AI-enabled competition?

On Operating Leverage & Cost Structure

1. Are you anticipating a shift in your fixed vs. variable cost structure due to AI-driven automation, and how does this affect your operating leverage and break-even analysis?
2. What components of your SG&A or COGS are most exposed to generative AI deflationary pressure, and what mitigation strategies are you pursuing?
3. Have you revised your margin targets to reflect an AI-driven decline in input costs or pricing power erosion? If so, how?

On Capital Allocation & ROI

1. How do you evaluate ROI on AI-related investments in terms of margin preservation vs. growth enhancement?
2. To what extent are you embedding AI-induced margin shifts into your hurdle rates for new project approvals?
3. Do you expect AI to reduce the need for human capital investments, and how are you reallocating that freed-up capital to maintain competitive advantage?

On Value Drivers & Terminal Value Assumptions

1. How has generative AI influenced your assumptions we should use for terminal margins and reinvestment rates in our DCF models?
2. Have you adjusted your narrative on your firm’s life cycle stage (growth, maturity, decline) in light of AI’s impact on margin compression?
3. Are you considering a decline in pricing power or customer stickiness in your valuation narrative as AI commoditizes previously differentiated offerings?

On Risk, Volatility & Market Reaction

1. What AI-related margin risks do you believe are underappreciated by the market, and how are you managing those internally?
2. Do you expect increased earnings volatility due to AI-driven changes in supply chains, pricing models, or customer behavior?
3. How are you communicating potential deflationary pressures from AI to sell-side analysts to manage expectations around future margin trends?

On Strategic Positioning & Industry Structure

1. Do you believe AI will lead to winner-takes-all dynamics in your industry, and how are you positioning yourself to avoid long-term margin erosion?
2. How is AI altering the balance of power between you and your suppliers or customers, and what are the margin implications?
3. Are you anticipating greater regulatory scrutiny or margin compression from AI-enabled productivity gains being passed on to consumers?

On Scenario Planning & Sensitivities

1. What downside scenarios have you modeled that reflect significant deflationary pressure from AI, and how do your margins hold up under those conditions?
2. How sensitive are your internal forecasts to changes in AI adoption rates, and what is the margin impact under fast vs. slow adoption curves?