Billions wiped off ‘shadow banks’ as AI threatens wave of defaults

Group 1: Market Impact - Billions have been wiped off "shadow banks" due to fears that AI will trigger loan defaults at software companies, with major US lenders losing over $2 billion in value this week [1] - The S&P Business Development Companies index, tracking 44 private credit funds, has lost about $2.2 billion in value since Monday amid fears of a software sector meltdown [5] - Shares of Hercules Capital, managing $5.5 billion, plunged 8.4% during this period, indicating significant market distress [5] Group 2: Company-Specific Developments - Blue Owl Capital, a major player in the private credit sector, saw its share price decline by 6.9%, while its tech-focused fund, Blue Owl Technology Finance, fell by 6.6% [6] - Software stocks have been particularly affected after Anthropic, a $350 billion AI lab, introduced a new legal and accounting tool that threatens existing software services [2] Group 3: Industry Concerns - The shadow banking sector is increasingly viewed as vulnerable, especially following the collapse of two major US companies last year, raising concerns over lax lending standards [7] - UBS predicts that AI disruption could lead to loan defaults rising to 13% in private credit, with 25% to 33% of the private credit universe exposed to AI-related disruptions [7][8] - The introduction of Anthropic's new AI tool, which can perform tasks with minimal prompts, raises alarms about the future of traditional software services [8]