The stock market has reacted swiftly against software companies and others considered vulnerable amid the recent artificial intelligence boom. However, UBS analyst Matthew Mish suggests that credit markets are likely the next sector to experience AI disruption risks.
According to Mish's research note released on Wednesday, corporate loans worth tens of billions could default in the coming year. This is particularly concerning for software and data services firms owned by private equity, which face pressure from AI challenges.
"We're pricing in what we describe as a rapid, aggressive disruption scenario," Mish, UBSâs head of credit strategy, explained in an interview with CNBC.
He further noted that his team has accelerated their forecast updates, prompted by newer models from companies like Anthropic and OpenAI projecting sooner-than-expected AI disruptions.
"The market has been slow to react because they didn't really think it was going to happen this fast," Mish stated. "It's forcing a reassessment in how credit is evaluated for disruption risk, since it's not an issue for 2027 or 2028."
The current month saw growing investor concern over AI, shifting the perception from an overall tech sector boost to a winner-take-all scenario where companies like Anthropic and OpenAI threaten existing players. While software firms bore the initial brunt, varied sectors including finance, real estate, and trucking also experienced sell-offs.
Mish's report, co-authored with other UBS analysts, outlines a baseline scenario where leveraged loan and private credit defaults could total between $75 billion and $120 billion by year's end.
CNBC arrived at these figures using Mish's default increase estimatesâup to 2.5% for leveraged loans and up to 4% for private creditâby late 2026. These are markets Mish anticipates reaching sizes of $1.5 trillion and $2 trillion, respectively.