Ares Sees Software Market Splitting as AI Rewrites Private Credit Investment Assumptions

Software investors are facing a split market as artificial intelligence reshapes which companies retain pricing power and strategic value. Blair Jacobson, co-president of Ares Management, said investors need more selective underwriting and deeper due diligence rather than treating the entire sector as exposed to the same risk at the IPEM Global conference in Paris.

The divide follows a sharp change in sentiment earlier in 2026, when investors weighed whether AI would erode the value of established software products. Jacobson described the broad reaction as a view that “all software will get eaten by AI,” according to Bloomberg. Ares continues to invest where it sees opportunities, CNBC reported, while the broader discussion has focused on how private-credit firms should reassess software bets.

AI is putting pressure on software companies unevenly, with product differentiation, customer dependence and exposure to automation shaping the investment case. Businesses that provide durable workflows, proprietary data or deeply embedded services face a different test from vendors whose features can be replicated inside general-purpose AI tools.

That distinction matters for investors evaluating debt as well as equity. A software company with recurring revenue can still face refinancing pressure if customers reduce seats, negotiate lower prices or replace narrow applications with AI-enabled alternatives. The debate has therefore shifted from whether AI threatens software in general to which business models can defend cash flow. Bloomberg described Jacobson's view as a bifurcation, while Bloomberg Law highlighted a disconnect between market headlines and conditions inside individual companies.

Private-credit managers have a direct stake in the software reassessment because many loans depend on predictable subscription revenue and strong enterprise retention. If those assumptions weaken, lenders must examine leverage, customer concentration, renewal behavior and the pace at which AI changes a borrower's product category.

The scrutiny reaches beyond Ares. CNBC framed the issue as a test for software investments by Ares and Man Group, showing how the AI debate is entering credit selection rather than remaining an equity-market narrative. Ares' continued software activity indicates that the firm still sees investable businesses, but Jacobson's emphasis on careful selection points to a narrower funnel and more demanding underwriting. The result is a market where financing terms can diverge sharply between resilient platforms and vulnerable point products.

Investors need company-level analysis to separate durable software assets from products exposed to rapid substitution. Jacobson's message centers on selection and due diligence, placing greater weight on how a business earns revenue, how customers use its tools and whether AI strengthens or weakens its position.

That work includes testing retention under changing customer budgets, measuring the cost of serving AI features and examining whether a product owns a critical workflow or merely supplies a convenient interface. It also requires separating short-term market fear from evidence of declining demand. Gurufocus described Ares as remaining committed to software investment amid AI disruption, while CNBC reported that the firm continues to pursue opportunities. Together, those accounts point to capital staying in the sector, with stricter filters around quality and valuation.

The gap between sweeping AI headlines and company-specific fundamentals is becoming central to software valuation. A single narrative can push down an entire group, even though customer switching costs, regulatory requirements and integration complexity vary widely across vendors.

That disconnect creates both risk and opportunity for buyers, lenders and management teams. Weak businesses face pressure to prove that their products remain essential, while stronger companies can use AI to improve functionality, automate service delivery or deepen customer relationships. News.bloomberglaw's account of Jacobson's comments places this disconnect alongside the wider bifurcation thesis. Bloomberg's interview context adds that the sector came under pressure as investors reassessed AI's impact, while CNBC's coverage shows the same question playing out in private-credit portfolios.

The next phase of the software market will be defined by evidence from operating results, financing activity and customer behavior. Investors will watch renewal rates, seat counts, pricing, gross margins and product adoption for signs that AI is accelerating demand or compressing software budgets.

Ares' stance keeps software within the investable universe but raises the bar for conviction. Man Group and other private-credit participants face the same need to distinguish temporary market repricing from structural impairment. The sector's winners will be the companies that demonstrate defensible customer value while incorporating AI without damaging economics. For investors, the central decision is no longer whether software survives AI, but which software businesses can finance and grow through the transition.