Supervest Explores How AI Could Reshape Private Credit Investing

Artificial intelligence is rapidly becoming one of the defining investment themes of our generation. Investors have spent considerable time discussing the companies building AI, the infrastructure required to support it, and the extraordinary productivity gains it may create. Far less attention has been paid to a different question: How might artificial intelligence reshape private credit portfolios?

For more than a decade, private credit has delivered attractive returns by financing businesses across a broad range of industries. Yet many of today's institutional private credit portfolios contain significant exposure to software companies, technology-enabled services businesses, professional services firms, and private equity-backed enterprises whose cash flows are ultimately tied to the knowledge economy. As AI continues to evolve, investors may benefit from examining not only the yield generated by their private credit investments but also the economic foundations supporting those yields. At Supervest, we believe this discussion deserves greater attention.

Private credit has grown into a multi-trillion-dollar asset class over the past decade. Much of that growth has occurred alongside the expansion of private equity, enterprise software, technology-enabled services, and professional services businesses. Many private credit portfolios today contain meaningful exposure to: Software companies Technology-enabled service providers Information services firms Consulting businesses Business process outsourcing providers Professional services companies Private equity-backed leveraged buyouts Historically, these have been attractive borrowers. They often possess recurring revenue, asset-light business models, attractive margins, and predictable growth profiles. However, investors should consider a simple question: How much of the cash flow supporting these businesses ultimately depends upon the continued scarcity of human intelligence?

For decades, the answer was straightforward. Human expertise was scarce, valuable, and difficult to replicate. A consulting firm's value was built upon the specialized knowledge of its employees. A software company relied on teams of developers to create and maintain products. Professional service organizations depended upon highly skilled workers whose expertise could not easily be replaced. Artificial intelligence may begin to alter that equation. Tasks that once required large teams of analysts, developers, researchers, or administrators can increasingly be performed with fewer people and greater efficiency. While AI is unlikely to eliminate these industries, it may change the economics that support them. Investors should consider how businesses whose value is tied primarily to human knowledge and information processing may evolve in a world where intelligence itself becomes more abundant.

When Recurring Revenue Isn't Necessarily Permanent Many private credit investments are underwritten using assumptions regarding future earnings, customer retention, and recurring revenue streams. Historically, those assumptions have generally proven reliable. The challenge is that AI may create uncertainty around business models that previously appeared highly predictable. If software development costs continue to decline, if enterprise customers begin replacing certain software subscriptions with internally developed AI-enabled tools, or if portions of professional services become increasingly automated, some