No signs of relief from the impact of AI yet, traders rush to sell software industry debt exposure
Concerns about AI are spreading in the credit market. Media reports, citing informed sources who requested anonymity due to the private nature of the transactions, indicate that the syndicated loans of software companies including Avalara Inc., Citrix, Dayforce, and Proofpoint have dropped by 1 to 3 points in the secondary market from last Friday to this Tuesday. These loans were quoted close to par value as of December 31 of last year
Leveraged loan traders are significantly reducing their exposure to debt in the software industry, with many loans priced close to or at par in early 2026. This reflects the market's growing concerns about artificial intelligence spreading into the credit market.
Media reports, citing informed sources who requested anonymity due to undisclosed prices, state that syndicated loans for software companies including Avalara Inc., Citrix, Dayforce, and Proofpoint have dropped 1 to 3 points in the secondary market from last Friday to this Tuesday. These loans were quoted close to par (approximately 100 cents on the dollar) as of December 31 last year.
The latest catalyst for the "AI panic" trading sweeping global markets is Anthropic's expansion of its Claude chatbot application to automate tasks in human resources, investment banking, and design.
The $5.5 billion loan for the human resources software platform Dayforce fell 1 point to 92.75 cents on Tuesday. The $2.5 billion loan for tax software provider Avalara dropped 2 points, with the bid price falling to 94.75 cents.
Previously, software companies financed private equity-driven acquisitions by borrowing billions of dollars, but now this debt has become a focal point for selling. Among the worst-performing companies in the Bloomberg U.S. Leveraged Loan Index are several tech firms, some of which have fallen into "distressed debt" territory.
Kevin Foley, Global Head of Capital Markets at JP Morgan, stated:
What was once seen as purely a growth tailwind has now become a potential disruptive force, and the market is becoming more discerning. AI will be here for the long term, and we are still learning how it will change our lives—both personally and professionally—but it will create new opportunities. This does not mean that new software products will not emerge, but it does change the logic of how the industry operates.
In an online press conference on Tuesday, Anthropic announced its latest developments with partner companies. Anthropic stated that it will also allow enterprise clients to customize plugins to meet their organizational standards. A significant portion of Anthropic's new products is aimed at the financial industry, including plugins specifically designed for financial analysis, equity research, private equity, and wealth management.
The sell-off of software loans has spread to broader U.S. credit risk indicators. On Tuesday, these indicators briefly reached their worst levels since November of last year. The Markit CDX North America Investment Grade Index, which typically rises when credit risk increases, widened by 1.38 basis points to 53.82 basis points. A similar index measuring high-yield market risk fell to 107.21
