The CEO of a 17 billion institution issues a warning: Don't wait until the impact of AI, just the "panic" is enough to trigger a wave of defaults in the software industry.

Founder of Arini Capital Management, Hamza Lemssouguer, recently stated in an interview that just the concern over the disruptive potential of artificial intelligence (AI) is enough to push up the financing costs for software companies, leading to a chain of problems in this highly leveraged industry. Lemssouguer said in the interview, "We don't have to wait for AI to truly have an impact, we will see problems erupt beforehand." "The market always anticipates. The most immediate problem now is that the financing costs for a large number of software companies are continuously rising, which will eventually lead to widespread defaults, industry consolidation, and chaos in the credit markets." It is understood that this credit investment institution, managing assets worth over $17 billion, currently has minimal exposure to the risks in the software industry. In recent weeks, due to investor concerns that AI technology development may disrupt the business models of software companies, this sector has been experiencing continuous sell-offs. Software companies generally have debt levels far exceeding their profit levels, and their financing highly depends on private credit institutions. This has also put related institutions in a difficult position: Blue Owl Capital has closed one of its funds and is selling off assets due to large-scale investor withdrawals. Lemssouguer warned that as direct lending institutions begin to reduce their exposure to the software industry, the impact may intensify. Although Arini Capital Management also engages in direct lending, they welcome the regulatory agencies to strengthen systemic risk reviews. "Considering the scale of industry expansion, the private credit market is already large enough to warrant attention and focus, this is a healthy direction for development," Lemssouguer said, "Every industry goes through cycles, and now it's the turn of the private credit industry." The private credit market has seen rapid growth in recent years, with a size of $1.8 trillion. Lemssouguer believes that stricter regulations do not necessarily mean a decrease in opportunities in this field, but the previous concentration of funds in the software industry is clearly excessive. "Every asset class carries both risks and opportunities, corresponding to expected returns, default probabilities, and potential losses," he said, "The concentration of direct lending in the software industry has exceeded a reasonable threshold. For credit institutions seeking prudent operations, such high industry concentration clearly goes against the principle of caution."