artificial intelligence<\/a> could disrupt large parts of the software industry have started to spill \u200binto credit markets, Morgan Stanley warned, as software accounts for \u200cabout 16%, or $235 billion, of the $1.5 trillion U.S. loan market.<\/p>\nWHY IT’S IMPORTANT<\/p>\n
Financial markets, juiced for \u200cmonths with investor enthusiasm about the AI trade, were jolted last week as global software stocks sank on worries that fast-advancing AI tools could disrupt the industry.<\/p>\n
CONTEXT<\/p>\n
A majority of the software sector’s exposure is tied to lower \u2060credit ratings – with 50% of \u200cthe loans holding a “B- or lower” credit rating – loans which typically denote a higher risk of default, the brokerage \u200dsaid in a note dated Monday.<\/p>\n
Morgan Stanley said 20% of software loans are “B” rated and 26% are “CCC” rated, while only 7% hold a higher “BB” rating.<\/p>\n
Unlike the equity \u200bmarket, more than 80% of software loans are issued by private \u200ccompanies and nearly 78% are sponsor- backed, which indicates limited access to financials needed to assess exposure to AI-driven disruption.<\/p>\n
BY THE NUMBERS<\/p>\n
“Software also faces a more front-loaded maturity wall than the overall market,” Morgan Stanley said as the sector has roughly 30% of outstanding loans due by 2028, \u2060versus 22% for the overall market.<\/p>\n
Also, 46% \u200bof software debt is due within the \u200bnext four years, compared with less than 35% of the wider loan market, Morgan Stanley said, which makes refinancing risks \u200dappear particularly acute \u2060if AI disruption-related concerns were to materialize quickly.<\/p>\n
KEY QUOTES<\/p>\n
However, the risk of large, systemic disruption across the software sector is limited in \u2060the near term, the brokerage said.<\/p>\n
“We expect continued price volatility in loans, but a near-term \u200cspike in defaults is unlikely,” it added.<\/p>\n
(Reporting by Siddarth S \u200cin Bengaluru; Editing by Leroy Leo)<\/p>\n","protected":false},"excerpt":{"rendered":"By Siddarth S Feb 10 (Reuters) – Concerns that artificial intelligence could disrupt large parts of the software…\n","protected":false},"author":2,"featured_media":291044,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[220,218,219,64663,5468,61,60,139427,2395,139425,138062,139426,134177,80],"class_list":{"0":"post-291043","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-credit-ratings","12":"tag-financial-markets","13":"tag-ie","14":"tag-ireland","15":"tag-loan-market","16":"tag-morgan-stanley","17":"tag-software-accounts","18":"tag-software-industry","19":"tag-software-loans","20":"tag-software-sector","21":"tag-technology"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/291043","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=291043"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/291043\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/291044"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=291043"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=291043"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=291043"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}