Software-as-a-Service selloff and the implications for private markets

The SaaS market remains a large and fast‑growing opportunity, but recent public market sell‑offs have forced investors to reassess how AI may reshape value across the software stack. While concerns about agentic AI displacing traditional workflows have pressured valuations, much of the adjustment also reflects a broader shift toward slower growth and greater focus on profitability. For private equity and private credit investors, this environment calls for more granular analysis of each software asset’s position in the stack, competitive moat, leverage profile and exposure to AI disruption rather than broad sector de‑risking.

Established SaaS platforms still benefit from sticky customer relationships, long‑term contracts and proprietary data that can enhance embedded AI features. As valuations reset unevenly across companies and vintages, advisors who understand these dynamics may find selective opportunities in both equity and credit where fears are overdone but fundamentals remain sound.