The software and technology sectors pose one of the all-time great concentration risks to the speculative-grade credit market, according to Deutsche Bank AG analysts. Bloomberg: They comprise $597 billion and $681 billion of the speculative-grade credit universe, or about 14% and 16% respectively, analysts led by Steve Caprio wrote in a Monday note. Speculative debt spans high-yield debt, leveraged loans and US private credit. That's "a meaningful chunk of debt outstanding that risks souring broader sentiment, if software defaults increase," the analysts wrote, with "a potential impact that would rival that of the Energy sector in 2016." Unlike in 2016, pressures would likely first emerge in private credit, business development companies and leveraged loans, with the high-yield market weakening later, the analysts added. The rapid adoption of artificial intelligence tools risks further weighing down multiples and revenues for software-as-a-service firms, while the US Federal Reserve's hawkish stance since 2022 has pressured cash flows, the analysts wrote. For instance, software payment-in-kind loan usage has risen to 11.3% in BDC portfolios, over 2.5 percentage points higher than the already elevated index average of 8.7%, according to Deutsche. PIK deals typically allow borrowers to pay interest in more debt rather than cash.

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Adobe has emailed users of Adobe Animate to let them know the popular animation and game development program will be discontinued on March 1, an abrupt decision that has angered animators and game developers who say the tool remains an industry standard in television and game production. Animate, the successor to the once-popular Flash, is widely used for graphic creation, animation and building games in HTML5. The company has not offered a reason for the shutdown. On BlueSky, artist and animator Julia Glassman wrote that many television productions, games, and animated media still rely on Animate and Flash pipelines and cannot simply pivot to entirely new software.

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Mike Swanson, commenting on modern software's intrusive, attention-seeking behavior: What if your car worked like so many apps? You're driving somewhere important...maybe running a little bit late. A few minutes into the drive, your car pulls over to the side of the road and asks: "How are you enjoying your drive so far?" Annoyed by the interruption, and even more behind schedule, you dismiss the prompt and merge back into traffic. A minute later it does it again. "Did you know I have a new feature? Tap here to learn more." It blocks your speedometer with an overlay tutorial about the turn signal. It highlights the wiper controls and refuses to go away until you demonstrate mastery. Ridiculous, of course. And yet, this is how a lot of modern software behaves. Not because it's broken, but because we've normalized an interruption model that would be unacceptable almost anywhere else.

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