Private Credit | Goldman Sachs Expects Default Rate to Rise to 8% as Software Industry Loans Face Challenges

SighingCashier · 2026-03-17T05:54:17+00:00

Morgan Stanley analyst report indicates that as AI technology develops, the predicted loan default rate will rise to 8%. Although the current fundamentals of private credit have not been significantly affected, high leverage and maturing debt in the software industry will drive default rates higher. The report points out that software loans are a major sector within the commercial investment portfolio, highlighting potential risks ahead.

SighingCashier

2026-03-17 05:54:17

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Morgan Stanley analysts released a report stating that as artificial intelligence (AI) technology continues to disrupt the software industry, default rates on direct loans are expected to rise to 8%.

The report indicates that although the disruptive impact of AI has not yet significantly affected the fundamentals of private credit, the high leverage ratios and upcoming maturities in the software sector could push default rates to levels not seen since the pandemic.

Morgan believes that the credit fundamentals of software loans are facing challenges, with the highest leverage ratios and the lowest coverage among major industries. While default rates in the public and private loan markets have decreased, they are expected to rise further as AI-driven disruption unfolds.

The firm states that software is the largest industry in the corporate development portfolio, accounting for about 26% exposure. Private credit collateralized loan obligations (PCCLOs) securitizing middle-market loans have a 19% exposure to software, many of which are nearing maturity. According to PitchBook data, the maturities of software loans are concentrated in the early years, with 11% maturing next year and another 20% due in 2028.

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