Software Sell-Off on AI Disruption Is Indiscriminate, Before Defensive Business Models Emerge; Levfin Borrower Management AI Commentary Centers Around Opportunities Than Threats But Limited Quantifiable Impact Presented

Since the late 2022 release of ChatGPT, large language models and other advances in AI have upended some business models, vastly reduced the cost of producing code, and reshaped certain jobs and processes that proved most vulnerable to the innovation. The gargantuan scale of investment, bullish guidance from the AI tech leaders, and accelerating pace of progress has grabbed the imagination of investors in the leveraged finance space, leading to a reassessment of near-term and long-term risks to their exposures. This has led to substantial drops in debt prices, often hurting long established business models across industries which had little in common previously. This selloff has accelerated, with equity and debt markets falling precipitously two weeks ago, triggered by a new legal tool from Anthropic’s Claude large language model.   The price action has been reflecting a growing fear and evidence, with the narrative that AI could replace certain products, reduce moats of others, and change pricing models. Meanwhile, management teams are hard at work figuring out how and where to implement AI to drive new business, reduce costs and defend from competition. The leveraged finance universe is particularly in the spotlight, as the software sector has been popular among[...]