JPMorgan issued a stark warning that the rapid rise of “Agentic AI” could threaten the credit stability of a significant portion of the U.S. leveraged loan market.
The bank’s research identifies $150 billion in software-related loans as being at “high risk” of disruption, as AI tools begin to erode the pricing power and business models of traditional enterprise software firms.
The “$150B Risk” Breakdown
JPMorgan’s credit analysts, led by data from their 2026 Corporate Compass report, highlighted that the risk is concentrated in highly leveraged software companies that have historically relied on stable, recurring subscription revenue to service their debt.
- The Exposure: Technology and software borrowers now account for roughly 17% of the total U.S. leveraged loan market.
- The “B- Minus” Problem: Approximately $130 billion to $150 billion of this debt is held by companies rated B- or lower. These firms are particularly vulnerable because they have little “margin for error” if their revenue growth slows.
- The AI Catalyst: The release of autonomous “coding agents” (like Claude Code and Devin) has started to commoditize software development. JPMorgan argues this forces “incumbent” software firms to either slash prices or face losing customers to AI-native startups, leading to a margin compression that makes it harder to repay loans.
Why Leveraged Loans are the “Tipping Point”
Leveraged loans are typically floating-rate debts issued to companies with high debt-to-earnings ratios. JPMorgan identified three reasons why AI makes this specific market a “surprise area of weakness”:
- Revenue Cannibalization: As AI does the work of human developers, the “per-seat” licensing model used by many software firms is breaking down. If a client needs fewer “seats” because AI is doing the work, the software firm’s revenue drops.
- Higher Borrowing Costs: As investors reassess AI risk, they are demanding higher yields (interest rates) to lend to tech companies. This increases the interest burden on firms that already have “fortress-level” debt.
- The “LME” Threat: The bank warned of an increase in Liability Management Exercises (LMEs)—basically “distressed exchanges” where companies try to restructure debt outside of bankruptcy to stay afloat.
Jamie Dimon’s Stance: “Banks are Winners, Borrowers are at Risk”
During an investor event in Manhattan on February 25, JPMorgan CEO Jamie Dimon sought to separate the bank’s own success from the risks facing its borrowers.
“In my view, we’ll be a winner [with AI]… but some competitors are doing ‘dumb things’ to boost interest income… in the next credit downturn, software could be a surprise area of weakness.” — Jamie Dimon
- JPMorgan’s AI Spend: The bank plans to spend $19.8 billion on technology in 2026 to improve its own lending and fraud detection.
- Defensive Positioning: Dimon noted that while AI helps the bank operate more efficiently, it creates a “credit story” where the bank must be extremely selective about which tech firms it continues to fund.
Market Context: The February Tech Sell-Off
This warning from JPMorgan added fuel to a broader “IT and Software rout” in February 2026.
- Private Credit Squeeze: Ratings agencies like Morningstar DBRS reported that downgrades in private tech credit are now outnumbering upgrades by 3-to-1.
- Stock Correlation: Major software incumbents have seen their stocks trade at a discount compared to hardware/chip makers (like Nvidia), reflecting the market’s fear that the “application layer” of software is being disrupted.
