News Digest: The AI Credit Crunch: A $3 Trillion Reality Check
February 11, 2026
The private credit boom is facing a structural threat as AI begins to cannibalize its favorite borrower: Enterprise Software. Following Anthropic’s release of advanced automation tools, the $3 trillion private credit market is bracing for a wave of business model obsolescence.
Software has long been the “gold standard” for private lenders, accounting for 17% of the US Business Development Companie’s (BDC) investments. However, as AI tools perform complex tasks that traditional software firms previously charged for, the revenue models backing these loans are under siege.
The contagion hit asset managers hard last week:
- Ares Management: Down 12%
- KKR: Down 10%
- Blue Owl: Down 8%
The sector’s reliance on Payment-in-Kind (PIK) loans, where interest is deferred and added to the principal, is a growing “yellow flag.” Software companies are the largest users of PIK structures. If AI adoption accelerates faster than these firms can pivot, deferred interest will quickly transform into a massive credit default.
UBS warns that in an aggressive disruption scenario, private credit default rates could spike to 13%. This dwarfs projected stress in leveraged loans (8%) and high-yield bonds (4%), highlighting the danger of opaque, illiquid lending to companies now “behind the AI curve.”
While some CEOs, like Ares’ Michael Arougheti, argue that lending to profitable, cash-flow-positive firms provides a buffer, the market is sensing “cockroaches.” As Jamie Dimon warned, stress in one borrower often signals hidden systemic trouble.
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