Apollo Global has built a risk assessment framework that categorizes software investments into 12 to 14 sectors to rank them by susceptibility to AI disruption
Context & Ripple Effects
Apollo’s framework formalizes a posture already visible in its 2025 credit positioning: sources said the firm shorted loans and rapidly reduced enterprise-software exposure over AI concerns. It also sits alongside reports that Blackstone has made AI vulnerability a central deal-screening issue.
The change is part of a broader investor shift from treating AI as a portfolio opportunity alone to treating it as a diligence and disclosure risk. Related coverage shows venture firms checking portfolio exposure and a growing share of large companies, especially software firms, identifying AI as a risk factor.
First-order effects
- Apollo can apply a common AI-disruption lens across software holdings and prospective investments, making sector-level vulnerability a more explicit input to underwriting, pricing, and portfolio oversight.
- Software assets assessed as more exposed face tighter scrutiny from Apollo, reinforcing the firm’s prior reduction of exposure and bearish credit positioning in the sector.
Second-order effects
- Other private-capital buyers and lenders may need more granular AI-risk work in competitive software deal processes, particularly where recurring revenue depends on functions that AI could commoditize or automate.
- Management teams seeking capital may face greater pressure to demonstrate durable differentiation and an AI response, rather than relying solely on historical software growth and retention metrics.
Third-order effects
- If large alternative investors consistently operationalize AI-risk scoring, software valuations could increasingly separate by perceived defensibility, changing how buyout firms allocate capital across the sector.
- The pattern points to AI becoming a standing investment-risk category—alongside conventional commercial and technology diligence—rather than an exceptional thematic concern; the durability of that shift depends on whether observed disruption translates into sustained changes in company economics.
The trend: Private-capital firms are moving from broad AI enthusiasm to systematic underwriting of which software businesses are exposed to AI-led disruption and which can benefit from it.