Is The AI Triggered Meltdown In Private Credit Overblown?

The article argues the AI-driven selloff in software has spilled into the $3 trillion private credit market, creating headline risk, redemption pressure and gated withdrawals rather than immediate fire-sales. Non-traded BDCs and interval funds saw roughly $14 billion in redemption requests in Q1 2026, about half of which sponsors honored, exposing the mismatch between semi-liquid retail access and illiquid multi-year loans (typical maturities 5–7 years). The author frames current stress as a feature of private credit — higher coupons compensate for higher volatility — and models a moderate AI disruption with 8–10% default rates that, given recovery assumptions and coupon income, could still leave unleveraged portfolios near or slightly above break-even. The piece urges investors to assess portfolio composition and borrower AI exposure, noting durable platforms (e.g., MSFT.OQ, CRM.N) are better positioned than speculative SaaS names.