Blue Owl Capital (OWL) pushes back on software doom narrative

Private credit firms have generated trillions in revenue by lending largely to risky companies.

Now they’re facing increased scrutiny. The pressure comes as the software sector suffers steep losses, driven by Wall Street’s growing fears that AI could broadly disrupt the industry

That pressure grew even more pronounced after Anthropic released a new AI-powered plugin aimed at the legal industry that can automate contract review, NDA triage, compliance workflows, legal briefings and templated responses.

Anthropic's launch led to a rout that caused software and service companies to lose about $300 billion in market value last Tuesday.

But Blue Owl Capital (OWL), the world's largest private credit firm, is pushing back on the doom narrative surrounding software companies as it has seen its stock plunge nearly 50% over the past year.

During the company's fourth quarter and full year 2025 earnings call last week, Blue Owl co-CEO Marc Lipschultz pointed to Nvidia founder and CEO Jensen Huang's recent comments calling the idea that AI will someday overtake software "the most illogical thing in the world."

"And the reason it's ridiculous is because software itself is not a monolith," Lipschultz said. "Software, it's a system of record where you are integrated into the business processes of large companies. Remember, business processes are a big part of how companies operate and software is an enabler."

While he acknowledged "there are certain parts of software that are vulnerable," he added that "we do not see any meaningful exposure to those more susceptible areas."

"We see deep exposure where we have it to businesses that have the attributes I described where there are actually very significant business processes, data, and kind of environmental regulatory constraints," Lipschultz said.

He said that since the launch of ChatGPT in November 2022, which is widely regarded as a turning point in AI, borrowers in Blue Owl's tech portfolio have achieved cumulative weighted average revenue growth of nearly 40% and cumulative weighted average EBITDA growth of nearly 50% through September.

"At the end of the day, stories don't drive results. Results drive results," he said. "As you can see, we have delivered on every one of our products, an absolutely top-level performance in both total return and in terms of non-accruals and in terms of loss."

Turbulence in software sector could be just beginning

Software investments make up 8% of Blue Owl's $307.4 billion assets under management.

About 20% of loans made to software companies have come from private credit funds. And analysts at Barclay's and UBS have both warned about the risk of growing losses on loans made to software companies.

However, Barclays noted that it was "nearly impossible" to know how much risk there was in this loan market since many of these software companies are still private.

Lipschultz said on the call that lending "is not a zero loss strategy" and that Blue Owl has "hundreds of borrowers and we will have losses in the portfolio."

"No one can loan money without having losses," he said. "The expectation of our investors is that we will rigorously underwrite our deals to minimize default and maximize recoveries over time, which will drive attractive total returns as we have done very well."

In a new note on Monday, Goldman Sachs strategist Ben Snider issued a potentially dire warning for the software industry and its investors, comparing what's happening with AI disruption to the way the newspaper industry was disrupted by the internet in the early 2000s.

He noted that the share prices of newspaper companies crashed 95% between 2002 and 2009 and "ended only as earnings estimates bottomed."

In other words, this could be just the beginning of the decline for software stocks.

"In this case, the uncertainty around the eventual impact of AI means near-term earnings results will be important signals of business resilience, but in many cases insufficient to disprove the long-term downside risk," Snider said.

But Lipschultz remains undeterred by all the negativity surrounding the software sector at the moment.

"We don't have red flags, we don't have yellow flags, we actually have largely green flags," he said. "The tech portfolio continues to be the most pristine amongst all of our portfolios, amongst all of our subsectors."

Blue Owl's shares have fallen 15.4% so far this year.