NEW YORK - Investors are rapidly offloading software loans in debt vehicles, signaling deepening distress in an industry upended by artificial intelligence.
Several Collateralized Loan Obligation (CLO) managers are reducing exposure to software sectors to avoid potential rating downgrades and defaults, according to credit analysts. This selling trend follows a broader software rout triggered by fears of widespread disruption from new AI tools.
Morgan Stanley analysts note software represents roughly 12 percent of CLO holdings. Spreads on these bonds have widened significantly over recent weeks. While some view current prices as a buying opportunity, the buyer base remains thin as firms assess AI risks.
Intuit shares have fallen 32 percent this year despite management claiming AI strategy success. Meanwhile, global CLO loan supply is projected to drop 25 percent this year due to waning investor demand and quality concerns across the $1.8 trillion private credit market.