A downturn in the software and technology sector could have an impact similar to that of 2016’s energy sector woes, Bloomberg reported Monday (February 9), quoting Deutsche Bank analysts.
The analysts highlighted concentration risks to the speculative credit market, saying the software and technology sectors account for 14% and 16% of that credit universe respectively, according to the report. According to the report, these percentages amount to $597 billion and $681 billion respectively.
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Deutsche Bank analysts said the total represents “a significant portion of outstanding debt, which risks souring broader sentiment if software failures increase,” the report said.
There is also a threat that the profits and revenues of software-as-a-service companies will come under pressure due to the adoption of artificial intelligence tools, the report said.
“Today’s reality has now changed from when many of these companies were initially funded,” Deutsche Bank analysts said, according to the report. “The SaaS value creation model is not yet mature enough to withstand a rapid rollout of AI tools.”
On January 31, it was reported that software companies were removing their loan prices fall amid investor concerns about AI advancements such as the coding capabilities of Anthropic‘S Claude model, will make many software offerings redundant.
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‘A storm has hit the credit market’ Scott Macklinhead of US leveraged finance at asset manager Capital workBloomberg said at the time. “The toughest calendar in months, largely driven by repricing but still overwhelming, has collided with rising existential questions around software business models as AI reshapes the lending sector.”
PYMNTS reported Friday (Feb. 6) that as of Wednesday (Feb. 4), more than $800 billion in market value had been wiped out of the company technology sector after Wall Street analysts pointed to the disruptive potential of new business AI tools from providers like Anthropic that are designed to automate processes such as contract reviews and legal briefings.
The PYMNTS Intelligence Report “Smart Spending: How AI is Transforming Financial Decision Makingfound that more than eight in 10 chief financial officers at large companies are already using AI or considering adopting the technology.
