💥 Private Equity Titans Struggle as AI-Fueled Software Selloff Hits Investor Confidence

Executives at Apollo, Ares, Blackstone, KKR, and other major private capital firms are facing an uphill battle convincing investors that their portfolios are insulated from a technology-driven selloff shaking the software sector. Once seen as a haven from market volatility, private markets are now grappling with the same fears that are roiling public equities—chief among them, the disruptive force of artificial intelligence.

Despite billions of dollars in new client inflows and a recent surge in mergers and acquisitions that analysts say should boost revenue, shares of alternative asset managers remain under pressure. Over the past six months, Ares, Apollo, KKR, and Blue Owl have all seen declines of 29%–36%, reflecting investor anxiety over potential AI disruptions to software investments.

“AI is probably the most disruptive technology risk that we could have imagined. I don’t want to sugarcoat it,” said Kort Schnabel, CEO of a major Ares debt fund. Yet he stressed confidence in a carefully constructed portfolio designed to weather the storm.

Ares reported that just 6% of its assets are in software, and only a small fraction faces meaningful AI-related risk. Apollo’s Marc Rowan echoed the sentiment, noting that software represents less than 2% of the firm’s total assets under management. “Rounds to zero,” he quipped regarding private equity holdings, highlighting how minimal exposure shields the firm from the worst of the selloff.

Even with these defenses, investors remain wary. Apollo shares have dropped 11% over six months, while KKR and Blue Owl are down 29% and 36%, respectively.

Executives have been quick to defend their books. Blue Owl’s co-CEO Marc Lipschultz emphasized, “The book is strong. We don’t see meaningful losses. We don’t see deterioration in performance.” Similarly, KKR co-CEO Scott Nuttall said the firm has been assessing AI risks for the past two years, distinguishing between threats, opportunities, and uncertainties. With $118 billion in unallocated “dry powder,” he argued that potential exposure to AI-driven disruptions is dwarfed by available investment capacity.

Rowan of Apollo also noted that software remains an “amazing” sector—albeit not at current valuations—suggesting that opportunity still exists even amid market jitters. Blackstone, the world’s largest alternative asset manager, is not immune either, with its share price down 24% over six months, despite software representing only 7% of its total assets.

Analysts say the narrative may be overblown. T. Rowe Price’s Karim Laib observed, “Investors worried last summer that alternative asset managers were financing too much of the AI buildout, and they would be the losers when it burst. Now the narrative is that alts will be losers because of AI’s transformative impact. The narrative has flipped, but the outcome remains the same.”

In other words, investor fear is persisting even as the fundamentals remain solid. For executives, the challenge is not only managing portfolios but also managing perception.

Alternative asset managers may be proving their resilience, but the shadow of AI looms large. Even minimal exposure to the software sector is enough to spook investors, highlighting how intertwined private markets and tech disruption have become. For now, these firms face a delicate balancing act: defending their portfolios, demonstrating growth potential, and convincing investors that AI may be an opportunity rather than an existential threat.