Private Market Executives Weigh AI Disruption and Software Sector Exposure at Berlin Conference

2026-06-11

The BareStory

Executives in the private credit and equity markets are assessing the impact of artificial intelligence on their expanding exposure to the software sector. Speaking at the SuperReturn International conference in Berlin, industry leaders discussed how AI technology is testing software business models and altering investment strategies.

Alternative lenders and private equity firms have significantly increased their investments in software in recent years. However, the rapid advancement of AI has prompted a reevaluation of these assets. According to Antoine Munfakh, deputy global head of private equity at Apollo, the industry's heavy concentration in software combined with high valuations represents a failure in risk management, noting that AI could lower barriers to entry and pressure profit margins. HarbourVest Partners chief executive officer John Toomey stated that the software industry is in the early stages of AI adoption, predicting divergent outcomes for companies depending on their adaptation rates.

In response to potential technological disruption, several firms are directing capital toward traditional industries. Executives from Apollo and Man Group indicated their firms are prioritizing older economy and heavy-asset businesses—such as business-to-business healthcare and distribution—where AI can be utilized to improve operational efficiency rather than threaten core business models. Ares co-president Blair Jacobsen added that his firm is targeting companies that provide mission-critical services with high switching costs.

The technological shift is also impacting broader market dynamics. Jacobsen observed that lenders financing software companies are currently seeing widening spreads, tightening documentation, and decreasing loan-to-value ratios. Additionally, Munfakh stated that a sector-wide backlog of unsold assets, which he estimated at four trillion dollars, will likely lead to a divergence in future returns between firms with conservative asset valuations and those that maintained overly aggressive marks.

Left Perspective

Exposing Speculative Market Hubris
Pivoting to Extractive Monopolies
Unmasking Phantom Asset Wealth

Right Perspective

Capital Seeks Rational Efficiency
Discipline Shields Systemic Stability
Valuation Reality Forces Evolution

Left Perspective

• Exposing Speculative Market Hubris Prioritizes economic stability over aggressive financialization. Apollo's admission that heavy software concentration combined with high valuations represents a "failure in risk management" validates long-standing skepticism of private equity models. Artificial intelligence's ability to lower entry barriers and pressure profit margins exposes how these firms previously inflated asset prices based on hype rather than enduring, sustainable value.

• Pivoting to Extractive Monopolies Focuses on protecting essential services from institutional rent-seeking. Retreating from software to target traditional industries like B2B healthcare and firms with "high switching costs" signals a strategic shift to exploit captive markets. Rather than driving genuine innovation, private capital is seeking safe havens where they can deploy AI strictly to maximize operational extraction—likely through labor reductions—without facing the competitive threats AI creates elsewhere.

• Unmasking Phantom Asset Wealth Values systemic resilience against institutional obfuscation and opaque accounting. The revelation of a four trillion dollar backlog of unsold assets highlights a dangerous disconnect between private market marks and actual economic reality. Firms clinging to overly aggressive valuations risk shifting the ultimate cost of this impending correction onto pension funds and the broader economy when these paper gains inevitably fail to materialize.

Right Perspective

• Capital Seeks Rational Efficiency Prioritizes dynamic market adaptation and productive capital deployment. The strategic pivot by firms like Man Group and Apollo toward traditional, heavy-asset industries demonstrates the free market's ability to seamlessly reallocate resources in the face of disruption. By investing in sectors where AI functions as an operational enhancement rather than an existential threat, these firms are actively optimizing legacy businesses and strengthening the foundational economy.

• Discipline Shields Systemic Stability Values fiscal prudence and risk-adjusted market mechanisms. The active tightening of loan-to-value ratios, stricter documentation, and widening spreads are features of a healthy, highly functioning credit ecosystem. Alternative lenders are rationally pricing in the new competitive risks of AI disruption, naturally safeguarding the financial system from overexposure without requiring clumsy regulatory intervention.

• Valuation Reality Forces Evolution Believes in the corrective, meritocratic power of free markets. The looming divergence in returns driven by the four trillion dollar asset backlog will organically separate disciplined managers from speculative actors. Rewarding firms that utilized conservative valuations while penalizing those with aggressive marks ensures long-term industry resilience, flushing out undisciplined capital to establish a healthier baseline for future investments.

How it may affect me

As a U.S. reader:

• In the long term, the financial stability of employee pension funds could be impacted if the estimated four trillion dollars in unsold, highly concentrated private equity assets lose value during a market correction.

• Workers and patients in traditional industries like healthcare may experience operational changes in the short to medium term as investment firms pivot capital into these sectors to deploy AI for operational efficiency and potential labor reductions.

• Consumers of mission-critical services could face sustained pricing pressures over time, as private capital actively targets captive markets with high switching costs to avoid the disruptive threats of AI.

• Software industry professionals and startups could see short-term shifts in business viability as lenders tighten financing rules, while AI lowers entry barriers and pressures profit margins across the sector.

Private Market Executives Weigh AI Disruption and Software Sector Exposure at Berlin Conference

The BareStory

Left Perspective

Right Perspective

How it may affect me

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