Private credit lenders pivot away from software as AI reshapes risk

Private credit lenders are re-evaluating their massive software exposure as artificial intelligence forces a reckoning for the sector's biggest bets.

Prominent investors are telling CNBC that the technology will forge winners and losers, rather than wipe it out in the so-called "SaaSpocalypse."

Wall Street is increasingly favoring loan deals that exclude software components, reflecting growing unease over the disruptive potential of artificial intelligence in the financial sector.

This shift is being driven by the realization that AI could fundamentally alter the competitive landscape for software companies, making traditional valuation metrics less reliable.

The era of severe pressure on software-as-a-service valuations has ended, according to Orlando Bravo, founder and managing partner of private equity firm Thoma Bravo.

Bravo stated that artificial intelligence now provides a path to growth, but it also introduces significant uncertainty for lenders who have historically relied on predictable cash flows from software businesses.

Lenders are now looking past the initial fears of a "SaaSpocalypse" to identify which companies will successfully integrate AI and which will be left behind.