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Posted February 10, 2026 at 10:15 am
Morgan Stanley says AI disruption worries are weighing on a $235 billion slice of leveraged loans, where weaker ratings and earlier maturities could make refinancing tougher — even if defaults stay contained for now.
AI jitters are spilling from software stocks into corporate debt – Morgan Stanley says about $235 billion of software leveraged loans is starting to look shakier as investors price in faster disruption risk.
Software is a big slice of the US leveraged-loan market (about 16% of roughly $1.5 trillion), so stress here can ripple through credit pricing. After a recent slide in global software shares, investors are rethinking whether AI tools could weaken subscription models and pricing power. Morgan Stanley flags weak credit quality: around half of software loans are rated B– or lower, with only a small share at the higher BB tier. There’s also less visibility, since most of these loans back private, sponsor-owned companies. And with a bigger share maturing by 2028 than the broader market, refinancing could get painful fast if lenders demand higher rates or tighter terms.
For markets: Credit is where tech stories get stress-tested.
Stock sell-offs can fade, but credit repricing can raise funding costs for an entire industry. If investors demand wider spreads on software loans, weaker borrowers may have to cut spending, delay deals, or accept tougher covenants – all of which can feed back into growth expectations.
Zooming out: Maturity walls hurt most when confidence cracks.
Defaults don’t need to surge for risk to climb: when lots of debt comes due, refinancing becomes the pressure point. If AI disruption worries stick, stronger credits should still refinance, while lower-rated borrowers could face the hardest negotiations – making the shakeout more selective than system-wide.
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Originally Posted February 10, 2026 – AI Fears Are Starting To Rattle Software’s US Loan Market
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