Goldman Sachs analysts, led by Amanda Lynam, argue that the prevailing market sentiment regarding low recovery rates from software defaults may be overly pessimistic. They highlight that leveraged finance investors are primarily concerned about the risks posed by AI to traditional software business models.
The firm notes that many credit capital structures established during a time of high valuations and low interest rates may need adjustments.
Despite the challenges, including a significant maturity wall of loans due in 2028 and a decline in software buyouts to $17 billion in the first five months of 2026—only 17% of the previous year's peak—Goldman sees potential for private credit to utilize its substantial reserves to address financing market disruptions.
The analysts also identify resilience in specific areas of the software sector, such as data infrastructure and cybersecurity, suggesting that investors should evaluate the industry more closely rather than adopting a broad negative outlook