Traders work on the floor of the New York Stock Exchange (NYSE) on Monday, November 17, 2025 in New York, USA.
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Private credit markets are facing new uncertainties as AI-powered tools begin to put pressure on software companies, a key group of private lender borrowers.
The software industry came under new pressure last week when artificial intelligence company Anthropic announced new AI tools, triggering a slide in software data provider stocks.
The AI tools developed by Anthropic are designed to perform complex specialized tasks currently undertaken by many software companies, raising new concerns that AI could undermine traditional software business models.
Shares of asset managers with large private credit franchises fell this week as investors worried that AI could upend borrowers’ business models, straining cash flow and ultimately increasing default risk.
Private Credit Stocks in the Past Month
ares management Although it fell more than 12% last week, blue owl capital Lost more than 8%. KKR It decreased by nearly 10%. TPG I lost about 7%. apollo global and black rock They fell more than 1% and 5%, respectively. For comparison, S&P500 fell about 0.1%, and the tech-heavy Nasdaq fell 1.8%.
The move underscores the growing anxiety surrounding private credit markets, which must prepare for the impact of AI disruption on the software sector, which is currently highly exposed to takeovers with opaque and illiquid financing, market watchers said.
Private credit financing for many software companies. If they start moving south, you’re going to have problems with your portfolio.
Jeffrey Hook
Johns Hopkins Carey Business School
“Enterprise software companies have been a favorite sector for private credit lenders since 2020,” Pitchbook wrote in a report in the aftermath of last week, adding that many of the largest ever unitranche (two or more loans rolled into one) loans, a popular structure in private credit markets, were to software and tech companies.
Software accounts for a significant portion of loans held by U.S. business development companies, accounting for about 17% of BDC investments by number of deals, second only to commercial services, according to PitchBook data.
If AI adoption accelerates faster than borrowers can adapt, the risks could be costly. UBS Group warns that in an aggressive disruption scenario, U.S. private credit default rates could rise to 13%, significantly higher than leveraged loan and high yield bond stress projections (which UBS estimates could be around 8% and 4%, respectively).
“It’s private credit financing for a lot of software companies,” said Jeffrey C. Hook, senior lecturer in finance at Johns Hopkins University’s Carey School of Business. “If they start moving south, that’s going to create problems for the portfolio.”
But Phuc said private credit strains predate the latest AI concerns, pointing to issues with liquidity and loan extensions. “Many private credit funds are having problems clearing their loans,” he said, adding that recent developments have only added another layer to a sector already under pressure.
The new round of warnings comes against a backdrop of recent concerns in the $3 trillion industry over leverage, opaque valuations and the risk of individual problems becoming systemic. Late last year, JPMorgan’s Jamie Dimon warned about the “cockroaches” in private credit, warning that stress among certain borrowers could point to further hidden problems.
“AI disruption may pose a credit risk to private credit lenders for some borrowers in the software and services sector, but perhaps not for others, as it depends on which financial institutions are behind the AI curve and which are at the top of the AI curve,” said Kenny Tan, head of U.S. credit research at Pitchbook LCD.
Tan added that software and services companies hold the largest share of payment-in-kind (PIK) loans, an arrangement that allows borrowers to defer interest payments in cash. PIK structures are often used to give fast-growing companies time to build revenue and cash flow, but the risk increases when the borrower’s finances deteriorate. In that case, deferred interest could quickly become a credit issue, he said.
Mark Zandi, chief economist at Moody Analytics, said that while it is difficult to fully assess the sector’s risks given the sector’s opacity, the rapid rise in AI-related borrowing, increased leverage, and lack of transparency are significant “yellow flags.”
“Significant credit problems are bound to occur, and while the private credit industry is probably able to absorb losses fairly well at the moment, that may not be the case in a year’s time if current credit growth continues.”
Apollo, Blue Owl, TPG and BlackRock did not immediately respond to CNBC’s inquiries, while KKR declined to comment.
Ares Management CEO Michael Arrogetti said the company’s exposure to software is limited, with software loans accounting for about 6% of total assets and less than 9% of private credit assets under management.
He added that Ares primarily lends to profitable software companies with good cash flow and keeps borrowing levels low, which has allowed it to keep problem loans close to zero.
