Macquarie Group has steadily built a sizeable presence in software lending and equity investing through its corporate advisory, capital markets and principal investment arm, positioning itself as a major backer of technology businesses. That strategy made sense when software valuations were climbing but the recent shift in sentiment about how artificial intelligence could reshape the sector is forcing investors and analysts to reassess how much risk sits on Macquarie’s balance sheet.
Current analysis suggests Macquarie’s private credit book has about $7.8 billion in loans tied to software companies, while its equity funds hold roughly $1.5 billion in software-related positions. If defaults among software borrowers rise to around 10% and recovery rates slide to about two thirds of loan values, losses on the credit side could reach roughly $275 million, with a more extreme scenario pushing that closer to $468 million. On the equity side, a sharp 30% markdown in software valuations could cut earnings by another $450 million or so. Some portfolio managers watching the stock note that listed software companies have already fallen 50 to 60% in the past six months while many private assets still sit on the books at far higher marks, which raises concerns that valuations have not fully caught up with reality.
In a milder scenario where software equity valuations only fall about 10% and defaults on software loans stay low at around 2%, the estimated earnings hit looks closer to $150 million on the equity side and about $40 million on the credit side. Existing provisions of roughly $750 million against the private credit portfolio, together with the fact that most of these loans are structured as senior secured, should cushion a large share of any losses. Even so, the broader private credit market is already under strain, with large global alternative managers seeing record redemption requests in their flagship funds and in some cases having to inject their own capital to meet investors wanting to exit. This tension between rapidly moving public markets and slower to adjust private valuations sits at the centre of the debate about how exposed Macquarie really is.
The bigger question is what this means for the future of software investing as AI continues to advance. Faster, cheaper AI tools are challenging the pricing power and long-term growth assumptions that underpinned many software and software-as-a-service business models and that repricing has already dragged down listed technology multiples and hit other alternative asset managers with heavy technology exposure. Private market valuations usually take longer to reset but when they do, the shift often comes in sharp steps rather than smooth declines, which suggests Macquarie’s books could see more noticeable changes over time. On the other hand, the senior secured nature of much of its lending means recoveries on problem loans are likely to be higher than in unsecured structures, so its credit exposure looks more resilient than its equity stakes. For now, Macquarie appears to be in a waiting game, stress testing its software portfolios more rigorously while investors watch to see whether the current AI-driven jitters become a temporary scare or a deeper reset across private technology markets.
