US leveraged loans worth $150B at risk from AI: JPMorgan
What's the story
JPMorgan has warned that the ongoing artificial intelligence (AI) revolution could put as much as $150 billion worth of US leveraged loans at risk. These loans are bundled into financial products known as collateralized loan obligations (CLOs). The warning was issued during the SFVegas 2026 conference and is based on market responses to sectors most vulnerable to AI disruption.
CLO explained
AI-related disruption's impact on CLO credit risk
Collateralized loan obligations (CLOs) are essentially bundles of risky business loans sold as investments. The rise of AI-related disruption is threatening companies, especially in the software sector. This could make it harder for some borrowers to repay these loans, creating a ripple effect on investors. JPMorgan's strategists, led by Rishad Ahluwalia, emphasized the need to consider broader AI disruption's impact on CLO credit risk in their Thursday note.
Financial impact
Loans from software companies are witnessing selloffs
Loans from software companies are witnessing selloffs: some $51 billion of B- or lower-rated software debt is due in 2028, and another $50 billion in 2029. If high interest rates persist and capital injections decline, it could weigh on broader tech investment. JPMorgan's strategists also flagged loan refinancing risks, pointing out the limited ability of private markets to refinance syndicated assets due to heavy software exposure in private credit.