Private credit lenders with significant exposure to software companies said artificial intelligence is reshaping the sector by separating resilient businesses from more vulnerable models rather than triggering a broad collapse in software valuations.
Executives from firms including Ares, Man Group and HarbourVest Partners said AI is testing assumptions around software growth, pricing power and borrower durability, while also creating opportunities for lenders focused on companies with stronger competitive positions.
Software sector faces a more divided outlook
Ares co-president Blair Jacobsen said concerns about a potential “SaaSpocalypse” gained attention earlier this year after fears that AI could make some software products obsolete contributed to a sharp technology sector sell-off in February. However, he said investor sentiment has since shifted toward identifying companies that can adapt to AI and those that may struggle.
Now there's a view there will be winners and losers.
Blair Jacobsen, Ares
Jacobsen said Ares continues to invest in software companies that provide mission-critical services, particularly enterprise resource planning systems used in regulated industries where the cost of switching systems or operational failure is high.
He added that widening spreads, tighter loan documentation and lower loan-to-value ratios have created more attractive conditions for credit investors lending to software companies.
Private credit exposure to software under review
Kevin Marchetti, chief investment officer and head of U.S. direct lending at Man Group, said software exposure has grown to between 20% and 30% on average for alternative lenders over the past five years. He described AI as a major test for the software credit thesis.
Marchetti said Man Group is increasingly focused on sectors where AI is expected to improve efficiency rather than disrupt business models. He highlighted business-to-business healthcare services and distribution companies serving smaller U.S. businesses as areas where AI could support productivity gains.
The software credit thesis is being tested, but I think there are still very good companies in that space.
Kevin Marchetti, Man Group
Investors expect uneven AI outcomes
HarbourVest Partners CEO John Toomey said the software industry remains in the early stages of AI adoption and that investors may have become overly negative toward the sector’s long-term prospects.
Toomey said some companies will face significant challenges while others could benefit by adapting their products and services to AI-driven demand. He described the future of the software sector as likely to produce “K-shaped” outcomes, with businesses diverging based on how successfully they integrate AI.
