In 2026, the private equity (PE) industry is experiencing an unprecedented divide. Although some industry giants like Blackstone Group and KKR have performed excellently in their financial reports, capital markets have significantly sold off their stocks, reflecting immense market anxiety. In 2025, Blackstone Group's net profit reached $2.14 billion, more than double that of the previous year, marking the best performance in 40 years; KKR raised $43 billion in the fourth quarter, the largest record in four years; Apollo Global Management raised $228 billion for the year, exceeding market expectations. However, these impressive numbers failed to support stock prices, as the private equity sector experienced a stock market-like crash in February. Blackstone's stock fell 20% in one month, KKR declined 30%, Apollo Global Management dropped 29%, and Ares Management and TPG both fell 33%.
The Rise of AI Brings Disruptive Risks
The phenomenon of stock price divergence is generally attributed to the rise of AI technologies. In January of this year, AI company Anthropic released Claude Cowork, claiming it could independently perform tasks such as financial auditing and personnel management, causing panic in the SaaS industry, with publicly traded SaaS companies' stocks collectively plunging. Then, in February, Anthropic launched Claude Code, asserting it could modernize COBOL systems overnight, sparking concern in the traditional software industry. Although later AI capabilities were proven to be exaggerated, this news still triggered a crisis of trust in the traditional SaaS business model.
Risk Exposure in the SaaS Industry and Changes in Private Equity Investments
Over the past decade, the software industry has been the core investment field for PE. According to data from SaaStr, from 2015 to 2025, PE firms acquired over 1,900 software companies, with deal values exceeding $440 billion, and nearly 20% of leveraged buyout targets last year were software firms. However, the disruptive technology of AI is starting to destabilize this model. With the development of AI, software stock valuations have begun to collapse, with the U.S. technology software stock index falling by 20% this year, and the average P/S ratio dropping from 9x to 6x.
Increasing Risks in Private Credit: Challenges in a High-Interest Environment
Moreover, risks in private credit are rapidly rising, mainly because it's traditionally believed that software companies have stable "perpetual" cash flows. In a high-interest rate environment, this assumption is gradually failing, leading to a surge in debt default risks. In February of this year, Blue Owl Capital transferred assets from three private credit funds to pension and insurance institutions. Although the discount was only 0.3%, the suspension of redemptions for one fund was widely interpreted by the market as "deteriorating asset quality," triggering a chain reaction among PE giants and causing stock prices to plummet.
Responses from PE Giants and Industry Prospects
Market concerns are not unfounded, as last year, many companies with large private credit were bankrupt, and First Brands even faced missing collateral situations, exposing risk control loopholes. JPMorgan Chase CEO Dimon once warned, "Seeing one cockroach could mean more," implying systemic risks in private credit.
In response to these challenges, PE giants have already started taking actions. Last year, Apollo Global Management reduced its software allocation from 20% to 10%; Thoma Bravo founder Orlando Bravo stated publicly at Davos that AI will disrupt tech software companies. Blackstone President Jonathan Gray also remarked, "The biggest risk is not a bubble, but a disruptive risk; what if the industry changes overnight?"
As AI's impact on the software industry intensifies, the turbulence within the private equity sector may just be beginning. This industry upheaval sparked by AI may lead to more profound consequences.
