The stock market has recently shown signs of punishing software firms and other industries vulnerable to the artificial intelligence boom, but UBS analyst Matthew Mish believes that credit markets may be the next area to face the threat of AI disruption. Mish predicts that tens of billions of dollars in corporate loans are at risk of default in the coming year, especially for software and data services firms owned by private equity.

According to Mish, the arrival of AI disruption is accelerated by new models from companies like Anthropic and OpenAI, catching the market off guard as the technology evolves faster than anticipated. Mish and his colleagues at UBS have updated their forecasts to reflect the potential impact of AI on leveraged loans and private credit, estimating a significant increase in defaults by the end of the year. While Mish acknowledges the uncertainties surrounding AI adoption and its effects on large corporations, he warns of a possible credit crunch and broad repricing of leveraged credit if the AI transition accelerates abruptly.