Private‑equity stocks sank sharply on Tuesday as the deep correction in software shares spread across financial markets, sparking concern that stress in credit portfolios could emerge next.
Major private equity giants tumbled in lockstep with a violent selloff in software, as fears mount that the software-annihilation trend is bleeding into the $1.7 trillion private credit market.
Private Equity Stocks Slide With Software Selloff; Credit Risks Rise
Shares of Apollo Global Management Inc. (NYSE:APO) slid 4.8%, Blackstone Inc. (NYSE:BX) dropped 5.2%, KKR Inc. (NYSE:KKR) plunged 9.7% and Ares Management Inc. (NYSE:ARES) fell 10.3%.
The losses came in tandem with a broader rout in software stocks. The tech‑focused ETF, the iShares Expanded Tech‑Software Sector ETF (NYSE:IGV), dropped for a sixth consecutive session, hitting lows last seen in April 2025.
Software valuations have been undercut by rising competition from generative AI platforms and concerns over slowing enterprise spending.
The ‘Software-Annihilation’ Trend
Macro strategist Andreas Steno Larsen, CEO of Steno Research, warned on Tuesday that the industry is facing a long-overdue reckoning.
“The software trade, the undisputed golden child of the private equity and credit industries, is facing a reckoning,” Larsen said in a note.
He points to a specific blind spot in the industry: the belief that software platforms were “un-disruptable” moats.
Larsen recalls warning PE firms about the impact of AI on financial software deals.
“We are going to build stuff again, as the services economy will die because of AI,” he said, adding that the software selloff is now spilling into the private credit world.
Software has been the largest single sector for private equity buyouts over the past few years, representing roughly 25% of total deal value, according to industry aggregate data.
That concentration has left some lenders holding concentrated exposures to companies whose earnings and valuations are under stress.
Now, he says, the “software-annihilation trend” is real.
“Lenders have significant ‘bags’ on their books,” he adds. “This is potentially where the ‘cockroaches’ will be found in this credit cycle.”
Larsen also offered a provocative take on the current liquidity environment. The larger listed players in private credit, he suggests, are high-beta liquidity proxies.
“Interestingly, we have reached a point where Apollo and Bitcoin are effectively the same trade,” Larsen argued. Both firms are expressions of the “shadow” monetary system’s expansion.
Image: Shutterstock
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