Industry sources indicate that artificial intelligence is increasingly impacting software companies' business models, with rising financing costs and stricter lender scrutiny causing many firms to postpone debt issuance plans.

Amid expectations that AI could fundamentally disrupt the industry, software companies in the United States and globally have paused or delayed financing activities. These concerns are particularly evident in loan markets, where bond spreads for high-risk companies now reflect greater default expectations. The AI-driven market anxiety has also affected private capital manager Blue Owl, whose stock declined following its announcement of a $1.4 billion asset sale to return capital to investors.

Matthew Mish, Head of Credit Strategy at UBS, stated, "We anticipate AI disruption risks becoming more pronounced in markets between 2026 and early 2027, especially for low-rated credit sectors with high refinancing needs—with the U.S. market more affected than Europe."

Leveraged loan markets have begun pricing in moderately higher default probabilities, particularly for U.S. tech firms. UBS predicts that in a rapid disruption scenario, default rates could increase by 3% to 5%, compared to the market's general expectation of a 1% to 2% rise.

"This disruption will unfold gradually over two years," Mish noted, adding, "We ultimately believe the market will absorb much, though not all, of the default risk we forecast."

One banker mentioned that even companies with higher debt ratings, perceived as less vulnerable to AI disruption, are waiting for improved market conditions before seeking financing.

According to insiders, market participants will closely watch investor response to software maker Qualtrics' financing plan—lenders are set to raise $5.3 billion next month to fund its acquisition of competitor Press Ganey Forsta.

Qualtrics declined to comment, while Press Ganey did not immediately respond to requests for comment.

Two anonymous bankers revealed that AI's potential disruption is affecting leveraged loan deals more significantly than high-yield bonds.

Brendan Holmer, Head of U.S. Default Research at Fitch Ratings, noted that technology borrowers represent the largest segment of the leveraged loan market, with software firms accounting for 60% of that share.

Data shows tech loans comprise 17% of the leveraged loan market's outstanding balance, valued at $260 billion.

Meanwhile, Holmer indicated that tech borrowers represent only 6% of the high-yield bond market's outstanding balance ($60 billion total), with software companies receiving 70% of these bond issuances.

Morgan Stanley analysis reveals that software industry debt exposure is concentrated in low-credit-rating categories—50% of loans are rated "B- or lower," indicating higher default risk.

BNP Paribas analysts estimate software and service sector exposure in private credit at approximately 20%.

U.S. stock markets have also felt AI's impact: investors initially sold software stocks before shifting to companies with higher automation risks. Software indices have declined 20% year-to-date.

Holmer stated that software industry maturities remain manageable, with only 0.5% of outstanding loans due this year and 6% due by 2027. For high-yield bonds, 0.7% mature this year and 8% by 2027.

Despite manageable maturity pressures, two bankers reported that software companies attempting to raise capital in U.S. debt markets face significantly higher financing costs from banks underwriting debt, while banks encounter increased skepticism from potential investors when marketing loans.

The first banker suggested that new debt issuances may require higher yields, with existing debt trading at deeper discounts. He added that companies would return to markets once pricing improves.

The second banker indicated that future deals might require stricter covenant terms—legal protections for investors—including maintenance covenants requiring borrowers to keep debt-to-earnings ratios below specific levels.

Since late January, several planned tech sector transactions have been canceled or postponed. The first banker disclosed that European digital services provider Team.blue delayed extending the maturity of its €1.353 billion ($1.6 billion) term loan, originally due September 2029, and postponed repricing a $771 million term loan. Team.blue declined to comment.

Currently, no leveraged loan transactions are advancing in the software sector. Since AI disruption concerns intensified in late January, existing software debt has traded at lower prices, with both companies and banks awaiting improved market conditions.

A Moody's report from January indicated that "2026 could bring greater refinancing pressure and default risk for lower-rated corporates with upcoming maturities."

Jeremy Burton, Portfolio Manager at PineBridge Investments' leveraged finance team, commented, "I don't expect software and business services to be popular financing sectors in the coming year. With technological change accelerating, investors need strong conviction to participate."