00:00Why are private credit lenders so central to AI lending right now?
00:05Yeah, well, it's actually really funny.
00:07It's the exact same dynamic.
00:09When software businesses really started to take off, the banks were relatively restricted in lending.
00:16And they were dealing with a lot of other crises.
00:18So they couldn't really put money out the door.
00:20And private credit was coming into its own.
00:23And so they really very heavily invested in these software businesses.
00:28And at the time, this was a great area of recurring revenue.
00:31It seemed like the best place ever to lend.
00:33And there was basically no competition.
00:35And I think what they really did not expect was the level that artificial intelligence could now make that software
00:43obsolete.
00:43Like, honestly, no one did.
00:45And I think it's just sort of a combination of factors that they now find themselves with that.
00:50And the thing that we've reported here at Bloomberg is that the software exposure that some of these private credit
00:56funds self-report is actually probably lower than reality.
01:00Because so much is software, as we are quickly learning, that a lot of these businesses that maybe are classified
01:08as healthcare actually are very much a healthcare software business.
01:12So a lot of people have focused on, you know, there's the software companies that have been hammered day after
01:18day.
01:18There was a period earlier this year where you just saw legal services get slammed.
01:22You saw asset managers get slammed because of various different AI tools that were released.
01:28But ultimately, if these companies go bust, private credit is on the hook for a large portion of their portfolio.
01:37And they may not be as diversified as they seem.
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