Markets3d ago·32 sources
AI Gave Investors a Glimpse of the Future This Month. And They Sold Their Stocks.
The US leveraged loan market experienced its steepest monthly decline in over three years during February, with average prices falling 1.34%. This volatility is attributed to growing investor anxiety surrounding artificial intelligence and its potential to disrupt traditional business models, particularly impacting the software and services sectors. Billions of dollars in debt have moved into distressed territory, making future financing more challenging for companies with below-investment-grade credit ratings. New loan issuance has plummeted to its lowest level since May, indicating caution from both lenders and borrowers. Outflows from US loan funds are at their highest since April of the previous year, intensifying downward price pressure. "AI displacement risk" has become a primary concern for leveraged loan investors, surpassing interest rate worries, and widening the gap between perceived AI winners and legacy software providers.