<\/p>\n
The impact of artificial intelligence on the software industry will not be severe enough to cause a sector-wide wave of credit rating downgrades, S&P Global Ratings said.<\/p>\n
AI has the potential to fundamentally change software companies, but will do so unevenly and be felt on a case-by-case basis, S&P said in a note published in response to questions it has received about the risks. That means it\u2019s unlikely to underpin a widespread decline in credit quality, it said.<\/p>\n
Rising concern among investors that the rapid development and adoption of AI will displace some software companies has seen debt issued by the sector\u2019s borrowers slide this year. It\u2019s also led to a selloff in the private credit industry\u2019s publicly traded lending vehicles and changed the way some private equity managers approach investing in software firms.<\/p>\n
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\u201cToday\u2019s environment reflects structural technological evolution rather than an abrupt macroeconomic shock,\u201d S&P\u2019s analysts said in the March 11 note, adding that made the effects for ratings more gradual and different to the Covid-19 pandemic.<\/p>\n
Companies with near-term maturities might be some of the most at risk should current market volatility persist. Issuers with debt coming due in 2027 or 2028 could face higher funding costs or limited access to financing, it said.<\/p>\n
While the private credit market\u2019s exposure to software is significant, accounting for some 20% of borrowers, S&P noted that the credit quality of these issuers has remained resilient. That said, the analysts flagged that this data was based on deals reviewed last year and \u201cthis year\u2019s trends could look different.\u201d<\/p>\n
Software businesses with sector expertise and proprietary data are likely to be the most insulated from AI displacement, while more commoditised products could face pressure. For companies producing software vulnerable to AI substitution, downgrades would likely be triggered by signals that a competitive position had weakened and revenues been eroded, S&P said.<\/p>\n
\u201cWe believe less-differentiated, rule-based, point-solutions software providers may face higher margin pressure and displacement than established platform leaders with deep domain expertise and proprietary data,\u201d its analysts said.<\/p>\n
\u00a9 2026 Bloomberg<\/p>\n
#impact #software #wont #trigger #save #downgrades<\/p>\n","protected":false},"excerpt":{"rendered":"
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