The Shift: How Big Credit Investors Are Abandoning Software Loans in 2026
- For two decades, software companies dominated the safest segment of leveraged loans—until 2026, when investors abruptly shifted their approach.
- According to verified reporting from Forbes (June 6, 2026), the pivot marks a turning point for collateralized loan obligations (CLOs), where software-backed loans were once the gold standard.
- Leveraged loans tied to software firms were long considered among the safest in CLO portfolios due to their recurring revenue models, high margins, and ability to reinvest profits.
“Software was the safest bet in leveraged loans. AI fear changed that.”
— Forbes, June 2026 headline
For two decades, software companies dominated the safest segment of leveraged loans—until 2026, when investors abruptly shifted their approach. The shift reflects a broader reckoning in credit markets: the rise of artificial intelligence has reshaped risk assessments, and Blackstone, the world’s largest alternative asset manager, is leading the charge in reallocating capital away from software and toward sectors perceived as more resilient in an AI-driven economy.
According to verified reporting from Forbes (June 6, 2026), the pivot marks a turning point for collateralized loan obligations (CLOs), where software-backed loans were once the gold standard. Now, investors are demanding higher yields and stricter covenants for tech debt, signaling a loss of confidence in the sector’s stability. Blackstone, with $1.3 trillion in assets under management (AUM) as of March 31, 2026, is at the forefront of this realignment, redirecting capital toward infrastructure, power, and life sciences—sectors it believes are better positioned for long-term growth in the AI era.
The Software Loan Paradox
Leveraged loans tied to software firms were long considered among the safest in CLO portfolios due to their recurring revenue models, high margins, and ability to reinvest profits. Yet by mid-2026, concerns over AI-driven disruption—including margin compression from automation, rising labor costs, and competitive pressure from AI-native startups—eroded investor confidence. The result: lenders are now treating software loans as higher-risk assets, demanding tighter terms or avoiding them altogether.
PitchBook data, cited in Forbes, shows that CLO issuance linked to software companies declined by nearly 20%
in the first quarter of 2026 compared to the same period in 2025. Meanwhile, loans backed by AI infrastructure—such as data centers, cloud computing, and semiconductor manufacturing—saw a surge in demand
, reflecting Blackstone’s strategic shift toward sectors it views as AI-resistant.
Blackstone’s Pivot: From Software to AI-Resilient Sectors
Blackstone’s realignment aligns with its broader investment thesis, as outlined in its 2026 first-quarter earnings and investor presentations. The firm’s Infrastructure of the Future
initiative, highlighted in its March 2026 materials, emphasizes three priority areas:
- Artificial Intelligence Infrastructure: Investments in data centers, AI training clusters, and semiconductor fabrication (e.g., partnerships with NVIDIA and TSMC-backed ventures).
- Power and Energy Transition: Renewable energy projects, grid modernization, and battery storage—sectors poised to benefit from AI-driven efficiency gains.
- Life Sciences: Biotech and AI-augmented healthcare, including digital diagnostics and drug discovery platforms.
In a Forbes interview with Blackstone Chairman and CEO Steve Schwarzman, he framed the shift as a response to the new reality of AI
, stating:
“We’re not betting against software—we’re betting on the infrastructure that will sustain it. The companies that thrive in an AI world won’t just be the ones building the models; they’ll be the ones powering them.”
— Steve Schwarzman, Blackstone CEO (paraphrased from Forbes, June 2026)
Blackstone’s move is not isolated. Other major CLO managers, including Apollo Global Management and KKR, have similarly tightened lending standards for software firms, according to industry sources. The shift underscores a broader credit-market trend: lenders are now prioritizing sectors where AI is a tailwind rather than a headwind.
Why This Matters for Credit Markets
The reclassification of software loans as riskier assets has ripple effects:
- Higher Borrowing Costs: Software companies may face elevated interest rates or reduced loan sizes, squeezing growth-stage firms reliant on debt.
- Valuation Pressures: Publicly traded software firms with high leverage could see credit rating downgrades, as lenders reassess their risk profiles.
- Capital Redirection: Dry powder from CLOs is flowing into AI-adjacent sectors, potentially accelerating consolidation in data centers, semiconductors, and renewable energy.
For Blackstone, the strategy reflects a calculated bet on structural trends. While software remains a critical end market for AI, the firm is doubling down on the plumbing
that enables AI—data infrastructure, energy, and life sciences—where it sees less volatility and higher long-term returns.
What Comes Next?
Industry analysts warn that the credit crunch for software could deepen if AI-driven disruption accelerates. Meanwhile, Blackstone’s focus on AI infrastructure suggests it expects these sectors to outperform in the coming decade. The firm’s 2026 second-quarter earnings, due in late July, will likely provide further clarity on how its reallocation is performing.
One certainty: the era of software loans as the safest bet in leveraged credit is over. In its place, a new hierarchy is emerging—one where AI’s infrastructure, not its applications, commands investor confidence.