AI Jitters Slam Private-Equity Stocks Despite Record Results
A February rout for Wall Street’s buyout titans
Record fundraising and profits on paper, plunging share prices in practice. That paradox defined February for U.S. private-equity giants. Blackstone, KKR, Apollo Global Management, Ares Management, Carlyle, and TPG all slumped sharply, with single-month declines reportedly ranging from the low teens to more than 30%. On February’s final trading day alone, heavy selling accelerated across the group, evoking comparisons to the 2008 financial crisis. The kicker? Many of these firms had just posted standout 2025 metrics—Blackstone’s net profit reportedly doubled year on year to $2.14 billion, KKR set a four-year high in quarterly fundraising, and Apollo marked a record annual haul—underscoring how sentiment, not earnings, is driving the tape.
Why AI suddenly threatens PE’s favorite cash flows
The bear case centers on software. In January, Anthropic unveiled “Claude Cowork,” an agent tool that can autonomously execute complex, multi-step tasks on a user’s computer. In late February, it has been reported that “Claude Code” was touted as capable of modernizing COBOL systems at unprecedented speed—news that reportedly triggered a one-day 13% plunge in IBM’s stock, its worst in 25 years. Even if early claims prove exaggerated, the doubt is planted: could AI compress the value of traditional SaaS subscriptions—long prized for recurring revenue, high margins, and sticky customers? That question matters because software has been the single most popular PE hunting ground for a decade. Industry tallies cited by Chinese outlet Huxiu (虎嗅) indicate more than 1,900 software buyouts since 2015 worth over $440 billion, and private credit exposure to SaaS that UBS reportedly estimates at up to one-third of a roughly $3 trillion market.
A private-credit scare, led by Blue Owl
The stress is most visible in private credit. Software multiples are compressing—U.S. software indices are reportedly down about 20% this year, with average P/S ratios sliding from 9x to 6x—while higher rates squeeze over-levered borrowers. The tremor became a shock when Blue Owl Capital moved to transfer assets from three private-credit funds to North American pensions and insurers at roughly 99.7% of face value and, reportedly, halted redemptions in one vehicle. The stock fell about 22% over three sessions, dragging peers lower. According to Bloomberg Intelligence, some $17.7 billion of U.S. tech loans slipped into distressed territory in just four weeks in February, much of it tied to SaaS. Morningstar data reportedly show leveraged software LBO loans in distress reaching about 13% of the total since late 2025. Default-rate forecasts are rising: Bloomberg pegs private-credit defaults near 6% this year; UBS warns that, if AI disruption accelerates, defaults could climb toward 13%. After several high-profile 2025 bankruptcies of private-credit-funded companies—one case at First Brands reportedly revealed missing collateral—JPMorgan’s Jamie Dimon cautioned that “when you see one cockroach, there are probably more.”
What PE is doing next
Some managers are already cutting exposure. Apollo reportedly halved its software allocation in 2025 from around 20% to roughly 10%. Thoma Bravo founder Orlando Bravo warned at Davos that AI will disrupt many software firms, especially those whose moat is purely technical. Blackstone president Jonathan Gray has argued the bigger danger today is disruption risk, not bubble risk: what if an industry changes overnight? For now, PE giants insist the market reaction is overdone. Yet with redemption pressure in private-credit funds, tighter financing, and AI’s capabilities evolving amid U.S. policy debates on AI safety and ongoing chip-export controls that shape compute supply, investors are asking a simple question with hard answers: what happens when “perpetual” cash flows no longer look perpetual?