JPMorgan has indicated that between $40 billion and $150 billion of leveraged loans bundled into US collateralized loan obligations (CLOs) could be impacted by the artificial intelligence (AI) boom. The Wall Street bank noted this is due to the concentration of these loans in sectors most closely associated with AI-related vulnerabilities. The estimate was shared in a review of the SFVegas 2026 conference, where the influence of software on corporate CLOs emerged as a key discussion point.
CLOs provide investors exposure to floating-rate debt rather than fixed-rate corporate bonds. They function by pooling leveraged loans into bond-like products with varying levels of risk and return, which are then sold to investors. Recently, following the release of Anthropic PBC's advanced Claude chatbot and the subsequent sell-off in software-related loans, CLO managers have been scrutinizing their portfolios to identify loans most susceptible to AI disruption.
In a report released on Thursday, strategists led by Rishad Ahluwalia wrote, "AI doomsday scenarios? That seems exaggerated. While it is reasonable to focus on the software industry, we have advised investors that a broader consideration of AI's disruptive impact on CLO credit risk—though still difficult to quantify—is more significant." To arrive at the $40–150 billion estimate, the strategists applied a simplified screening method based on market prices and rating information to assess AI-related credit risk in CLOs. However, they acknowledged that the approach requires further refinement, citing the healthcare sector as an example where proprietary data issues and complex regulations make clear judgments challenging.
The strategists also highlighted concerns around loan refinancing risk, noting that approximately $51 billion of software-related debt rated B- or lower is set to mature in 2028, with another $50 billion maturing in 2029. They wrote, "Substantial exposure to the software sector in private credit suggests limited capacity for private markets to refinance syndicated loan assets, unlike in the past when deals commonly shifted from public to private markets."
During the conference, participants expressed additional worries that price risks could emerge if the labor market weakens or AI-related anxiety triggers a broader sell-off. The strategists added, "To be fair, our economists expect a more gradual diffusion of AI throughout the economy. However, leveraged financial market exposure to AI also carries the risk of an abrupt reassessment of expectations, a theme reflected in our cautious outlook for 2026 CLOs."
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