By Mackenzie Tatananni
As investors sour on software stocks, alternative asset managers are getting caught in the fallout. The selloff may be overblown, say analysts.
Anthropic, the developer of the artificial-intelligence model Claude, unveiled a host of AI automation tools on Friday with applications across legal services, finance, and sales. Many investors took it as a sign that AI could soon disrupt the traditional software-as-a-service business model, sending stocks spiraling.
The recent pressure on the software sector also has hammered shares of alternative asset managers, an all-encompassing term for firms that invest in untraditional assets. Blackstone is the largest in terms of assets under management.
The selloff in so-called alts largely has been fueled by concerns around the group's software exposure and the potential impact on growth in the event that investment performance deteriorates, Goldman Sachs analysts noted on Wednesday.
A basket of nine alts compiled by the firm fell 7% on Feb. 3, worse than a 6% drop in the software sector itself. "On the back of these moves, Alts valuation levels are yet again approaching recent lows," analysts noted.
While Goldman conceded that a lack of visibility into the underlying portfolio companies and the significant moves in software stocks as well as credit markets were valid concerns, the firm believes the selloff in alts is overdone.
"Ultimately, software remains a relatively small portion of firmwide management fees," Goldman wrote. The firm's research indicates that software represents a small portion of firmwide management fees, with private-equity software comprising around 5% of the fees, with a similar contribution on average from private credit and direct lending.
For the wary investor, the firm has selected Carlyle Group, Apollo Global Management and Brookfield Asset Management as the best equipped to weather the storm. These alternative managers have "the least exposure to software investments at an overall enterprise level" out of the names in their coverage universe, Goldman analysts said.
There's a case to be made that alts selloff is overblown. But what about the selloff in software stocks themselves? Jefferies analysts don't anticipate the arrival of a "software apocalypse," as recent volatility in the market might suggest.
The recent panic mirrors last year's DeepSeek scare, when the release of a new model from a Chinese AI developer sparked concerns about competition and the overall sustainability of the AI boom.
The panic was overblown at the time, Jefferies argues. The total cost to train and run DeepSeek's model was exponentially higher than the company let on, and investors failed to consider that businesses generally wouldn't use Chinese models due to security concerns.
Similarly, while many in the U.S. will use Claude or OpenAI's ChatGPT, current security risks remain high for large language models, Jefferies analysts wrote. In their view, "legal plug-ins will not replace robust, mature tool stacks like Intuit."
There's also the question of whether AI can handle security and maintain itself in the coming two to three years. Already, hurdles are emerging: Although models are improving at agentic tasks, many still fail on large codebases, Jefferies wrote. The firm singled out Claude Code as an example, saying it struggles with context management and even introduces errors.
Likewise, Anthropic's Opus 4.5 "cannot match the quality, depth, and reliability of mature platforms," analysts argued. It was released in November and touted as "the best model in the world for coding, agents, and computer use" by its developer.
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
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(END) Dow Jones Newswires
February 04, 2026 16:01 ET (21:01 GMT)
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