Private Credit Leaders Discuss AI's Role in Software Sector Volatility Amid Growing Market Size

Goldman Sachs Research convened discussions with top credit executives, who identified artificial intelligence as a key driver of increased dispersion and volatility in private credit and leveraged loan markets, particularly in the software sector. Benzinga reported that software represents the largest sector in both private credit and the broadly syndicated leveraged loan market.

Executives including Oaktree CEO Howard Marks, Ares CEO Michael Arougheti, Marathon CEO Bruce Richards, and Goldman Sachs chief credit strategist Amanda Lynam agreed that current stresses in private credit do not pose systemic risk.

Amanda Lynam highlighted the sector's exposure, stating, 'While software is the largest sector in private credit, it's also the largest in the broadly syndicated leveraged loan market. She added that private credit is well-positioned to deploy its dry powder amid these dynamics.

Lynam also noted that public markets are likely to remain volatile, potentially driving more capital into opportunistic credit strategies.

Lynam further emphasized that AI-driven disruption has long been on the radar of private credit managers, though its pace may be accelerating faster than expected. This perspective aligns with views from other executives on managing sector-specific risks.

Michael Arougheti expressed limited concern over software exposure, stating he is not particularly worried and that the concerns appear overdone.

In contrast, Bruce Richards pointed to data showing 23% of the private market consists of software loans, which he described as an excessive figure by any standard. Richards expects incredibly high software sector default rates in 2027, 2028, and 2029, with peak defaults of 15% and double-digit default rates in each of those years, alongside software loan loss rates in the 70-100% range.

Despite these projections, Richards stated that direct lending will emerge bigger and stronger than ever, as the software correction will lead to a return of manager discipline.

Howard Marks maintained a cautious stance, expecting retail investors to act more carefully as weaknesses in publicly sold private asset funds become visible. Marks added that going through a full credit cycle could create a stronger, healthier environment for direct lending and private credit overall.

Private credit has reached $2 trillion in global assets under management as of May 4, 2026, according to Moody’s.

The agency projects that private credit assets under management will exceed $2 trillion in 2026 and move toward $4 trillion by 2030.