AI‑led software selloff may pose risk for $1.5 trillion U.S. credit market, says Morgan Stanley

By Siddarth S

Feb 10 (Reuters) - Concerns that artificial quality could disrupt ample parts of the bundle manufacture person started to spill ​into recognition markets, Morgan Stanley warned, arsenic bundle accounts for ‌about 16%, oregon $235 billion, of the $1.5 trillion U.S. indebtedness market.

WHY IT'S IMPORTANT

Financial markets, juiced for ‌months with capitalist enthusiasm astir the AI trade, were jolted past week arsenic planetary bundle stocks sank connected worries that fast-advancing AI tools could disrupt the industry.

CONTEXT

A bulk of the bundle sector's vulnerability is tied to little ⁠credit ratings - with 50% of ‌the loans holding a "B- oregon lower" recognition standing - loans which typically denote a higher hazard of default, the brokerage ‍said successful a enactment dated Monday.

Morgan Stanley said 20% of bundle loans are "B" rated and 26% are "CCC" rated, portion lone 7% clasp a higher "BB" rating.

Unlike the equity ​market, much than 80% of bundle loans are issued by backstage ‌companies and astir 78% are sponsor- backed, which indicates constricted entree to financials needed to measure vulnerability to AI-driven disruption.

BY THE NUMBERS

"Software besides faces a much front-loaded maturity partition than the wide market," Morgan Stanley said arsenic the assemblage has astir 30% of outstanding loans owed by 2028, ⁠versus 22% for the wide market.

Also, 46% ​of bundle indebtedness is owed wrong the ​next 4 years, compared with little than 35% of the wider indebtedness market, Morgan Stanley said, which makes refinancing risks ‍appear peculiarly acute ⁠if AI disruption-related concerns were to materialize quickly.

KEY QUOTES

However, the hazard of large, systemic disruption crossed the bundle assemblage is constricted successful ⁠the adjacent term, the brokerage said.

"We expect continued terms volatility successful loans, but a near-term ‌spike successful defaults is unlikely," it added.

(Reporting by Siddarth S ‌in Bengaluru; Editing by Leroy Leo)