Asset Managers Face AI-Driven Shock Amid Software Selloff
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 15h ago
0mins
Should l Buy ARES?
Source: Newsfilter
- Market Capitalization Loss: The software sector's selloff has wiped out nearly $1 trillion in market capitalization, leading the Dow Jones US Asset Managers Index to decline nearly 5% this week, reflecting investor concerns over loan and leverage exposure.
- Declining Private Equity Deal Volumes: Morgan Stanley noted that technology services deal volumes account for nearly 21% of overall private equity activity, with TPG, Carlyle, and KKR slightly above this level, indicating weakened market confidence in software-related investments.
- Rising Loan Risks: Software borrowers are shouldering an average debt-to-EBITDA ratio of 7.4 times, significantly higher than the 5.9 times average across a $1 trillion loan pool studied by KBRA, highlighting the private credit market's heavy reliance on the software sector and its associated risks.
- Portfolio Review: Companies like Ares and KKR are reviewing their portfolios to assess the impact of AI on their software investments, demonstrating a cautious approach among asset managers in the face of market volatility.
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Analyst Views on ARES
Wall Street analysts forecast ARES stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for ARES is 196.55 USD with a low forecast of 175.00 USD and a high forecast of 222.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
11 Analyst Rating
9 Buy
2 Hold
0 Sell
Strong Buy
Current: 121.870
Low
175.00
Averages
196.55
High
222.00
Current: 121.870
Low
175.00
Averages
196.55
High
222.00
About ARES
Ares Management Corporation is an alternative investment manager offering clients complementary primary and secondary investment solutions across various asset classes. Its segments include Credit Group, Private Equity Group, Real Assets Group, Secondaries Group, and Other. The Credit Group segment manages credit strategies across the liquid and illiquid spectrum, including liquid credit, alternative credit, direct lending and APAC credit. The Private Equity Group segment categorizes its investment strategies as corporate private equity, special opportunities and APAC private equity. The Real Assets Group segment manages comprehensive equity and debt strategies across real estate and infrastructure investments. The Secondaries Group segment invests in secondary markets across a range of alternative asset class strategies, including private equity, real estate, infrastructure and credit. It has operations across North America, South America, Europe, Asia Pacific and the Middle East.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Deutsche Bank Upgrades Ares Management to Buy Following Q4 Results
- Earnings Performance: Ares Management's fourth-quarter results fell short of expectations, leading to an 8.4% drop in shares post-announcement, despite strong fundraising and investment activities supporting higher assets under management.
- Optimistic Fundraising Outlook: Management anticipates robust fundraising in 2026, expecting total fundraising this year to meet or exceed record levels set in 2025, which will support future revenue growth.
- Fee-Related Earnings Growth: Management reaffirmed the outlook for fee-related earnings (FRE) margin expansion, guiding towards the high end of its annual expansion target range, bolstered by synergies from GCP integration and improved operational efficiencies.
- Improving Investment Environment: Ares' investment pipeline has reached record levels, indicating strong future management fee growth, particularly as its $101 billion in assets under management that are not yet fee-bearing will soon become fee-generating.
See More
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- Four Roses Brand Deal: Kirin Holdings has agreed to sell the Four Roses bourbon brand to E. & J. Gallo Winery for approximately $775 million (around 120 billion yen), enhancing Gallo's position in the premium spirits market.
- Genius Sports Acquisition: Genius Sports has agreed to acquire digital sports and gambling media company Legend for $1.2 billion, with $900 million in cash and $100 million in stock, financed through an $850 million loan, despite a 27% drop in stock price following the announcement.
- Bankruptcy Filing Preparation: Catalyst Brands is preparing to file for bankruptcy for the entity operating Eddie Bauer locations, which may impact the overall operations and brand value of Authentic Brands Group.
See More
Asset Managers Face AI-Driven Shock Amid Software Selloff
- Market Capitalization Loss: The software sector's selloff has wiped out nearly $1 trillion in market capitalization, leading the Dow Jones US Asset Managers Index to decline nearly 5% this week, reflecting investor concerns over loan and leverage exposure.
- Declining Private Equity Deal Volumes: Morgan Stanley noted that technology services deal volumes account for nearly 21% of overall private equity activity, with TPG, Carlyle, and KKR slightly above this level, indicating weakened market confidence in software-related investments.
- Rising Loan Risks: Software borrowers are shouldering an average debt-to-EBITDA ratio of 7.4 times, significantly higher than the 5.9 times average across a $1 trillion loan pool studied by KBRA, highlighting the private credit market's heavy reliance on the software sector and its associated risks.
- Portfolio Review: Companies like Ares and KKR are reviewing their portfolios to assess the impact of AI on their software investments, demonstrating a cautious approach among asset managers in the face of market volatility.
See More
The Impact of Software Concerns on BDC Stocks: Reasons Some May Be Good Investment Opportunities
- Private Credit Sector: The private credit sector is facing challenges, likened to "cockroaches" emerging from the software industry.
- Opportunities in Business Development Companies: This situation may present investment opportunities in business development companies that hold the debt of affected firms.
See More
Wall Street's Latest Rating Changes Overview
- Amazon Downgrade: DA Davidson downgraded Amazon from Buy to Neutral, citing concerns that Amazon Web Services (AWS) is losing market share amid competition from Microsoft and Google, indicating a potential need for increased investment to regain its leading position in the cloud computing sector.
- Merit Medical Initiation: BTIG initiated coverage on Merit Medical with a Buy rating, highlighting its comprehensive product portfolio used across various interventional procedures, which underscores the company's high-quality positioning and growth potential in the medical device market.
- JBS Buy Rating: UBS initiated coverage on Brazilian meat company JBS with a Buy rating and a price target of $19.5 per share, implying a 23% upside, reflecting market confidence in its re-rating and potential stock price appreciation.
- Vistra Upgrade: Goldman Sachs upgraded Vistra from Neutral to Buy, projecting a potential EBITDA increase of 3-9% by 2028, indicating investor optimism regarding its future profitability and growth prospects in the nuclear energy sector.
See More
US Stocks Plunge as Tech Sector Leads Decline
- Tech Sector Decline: Qualcomm's (QCOM) forecast of weaker-than-expected Q2 revenue led to an over 8% drop in its stock, triggering a sell-off across the tech sector, with the Nasdaq 100 index hitting a 2.5-month low, indicating waning investor confidence in technology stocks.
- Weak Labor Market Signals: Challenger's report revealed a staggering 117.8% year-over-year increase in job cuts for January, totaling 108,435, the highest for January since 2009, while initial jobless claims rose by 22,000 to 231,000, highlighting vulnerabilities in the US labor market that could hinder economic recovery.
- Bitcoin Plunge: Bitcoin (^BTCUSD) plummeted over 12% to a 1.25-year low, reflecting deepening negative momentum in the cryptocurrency market, with approximately $2 billion flowing out of Bitcoin ETFs in the past month, signaling a decline in investor confidence.
- Earnings Season Impact: Despite 150 S&P 500 companies set to report earnings this week, market focus on economic data intensifies, with S&P 500 earnings expected to grow by 8.4% in Q4, yet overall market sentiment remains suppressed by recent economic weakness.
See More
Deutsche Bank Upgrades Ares Management to Buy Following Q4 Results
- Earnings Performance: Ares Management's fourth-quarter results fell short of expectations, leading to an 8.4% drop in shares post-announcement, despite strong fundraising and investment activities supporting higher assets under management.
- Optimistic Fundraising Outlook: Management anticipates robust fundraising in 2026, expecting total fundraising this year to meet or exceed record levels set in 2025, which will support future revenue growth.
- Fee-Related Earnings Growth: Management reaffirmed the outlook for fee-related earnings (FRE) margin expansion, guiding towards the high end of its annual expansion target range, bolstered by synergies from GCP integration and improved operational efficiencies.
- Improving Investment Environment: Ares' investment pipeline has reached record levels, indicating strong future management fee growth, particularly as its $101 billion in assets under management that are not yet fee-bearing will soon become fee-generating.
See More
Multiple Acquisition Deals and Bankruptcy Developments
- Potential BDx Sale: I Squared Capital is considering options for its Asian data center business BDx, with a potential sale price of up to $2 billion, which could reshape its investment portfolio in the Asian market.
- Four Roses Brand Deal: Kirin Holdings has agreed to sell the Four Roses bourbon brand to E. & J. Gallo Winery for approximately $775 million (around 120 billion yen), enhancing Gallo's position in the premium spirits market.
- Genius Sports Acquisition: Genius Sports has agreed to acquire digital sports and gambling media company Legend for $1.2 billion, with $900 million in cash and $100 million in stock, financed through an $850 million loan, despite a 27% drop in stock price following the announcement.
- Bankruptcy Filing Preparation: Catalyst Brands is preparing to file for bankruptcy for the entity operating Eddie Bauer locations, which may impact the overall operations and brand value of Authentic Brands Group.
See More
Asset Managers Face AI-Driven Shock Amid Software Selloff
- Market Capitalization Loss: The software sector's selloff has wiped out nearly $1 trillion in market capitalization, leading the Dow Jones US Asset Managers Index to decline nearly 5% this week, reflecting investor concerns over loan and leverage exposure.
- Declining Private Equity Deal Volumes: Morgan Stanley noted that technology services deal volumes account for nearly 21% of overall private equity activity, with TPG, Carlyle, and KKR slightly above this level, indicating weakened market confidence in software-related investments.
- Rising Loan Risks: Software borrowers are shouldering an average debt-to-EBITDA ratio of 7.4 times, significantly higher than the 5.9 times average across a $1 trillion loan pool studied by KBRA, highlighting the private credit market's heavy reliance on the software sector and its associated risks.
- Portfolio Review: Companies like Ares and KKR are reviewing their portfolios to assess the impact of AI on their software investments, demonstrating a cautious approach among asset managers in the face of market volatility.
See More
The Impact of Software Concerns on BDC Stocks: Reasons Some May Be Good Investment Opportunities
- Private Credit Sector: The private credit sector is facing challenges, likened to "cockroaches" emerging from the software industry.
- Opportunities in Business Development Companies: This situation may present investment opportunities in business development companies that hold the debt of affected firms.
See More
Wall Street's Latest Rating Changes Overview
- Amazon Downgrade: DA Davidson downgraded Amazon from Buy to Neutral, citing concerns that Amazon Web Services (AWS) is losing market share amid competition from Microsoft and Google, indicating a potential need for increased investment to regain its leading position in the cloud computing sector.
- Merit Medical Initiation: BTIG initiated coverage on Merit Medical with a Buy rating, highlighting its comprehensive product portfolio used across various interventional procedures, which underscores the company's high-quality positioning and growth potential in the medical device market.
- JBS Buy Rating: UBS initiated coverage on Brazilian meat company JBS with a Buy rating and a price target of $19.5 per share, implying a 23% upside, reflecting market confidence in its re-rating and potential stock price appreciation.
- Vistra Upgrade: Goldman Sachs upgraded Vistra from Neutral to Buy, projecting a potential EBITDA increase of 3-9% by 2028, indicating investor optimism regarding its future profitability and growth prospects in the nuclear energy sector.
See More
US Stocks Plunge as Tech Sector Leads Decline
- Tech Sector Decline: Qualcomm's (QCOM) forecast of weaker-than-expected Q2 revenue led to an over 8% drop in its stock, triggering a sell-off across the tech sector, with the Nasdaq 100 index hitting a 2.5-month low, indicating waning investor confidence in technology stocks.
- Weak Labor Market Signals: Challenger's report revealed a staggering 117.8% year-over-year increase in job cuts for January, totaling 108,435, the highest for January since 2009, while initial jobless claims rose by 22,000 to 231,000, highlighting vulnerabilities in the US labor market that could hinder economic recovery.
- Bitcoin Plunge: Bitcoin (^BTCUSD) plummeted over 12% to a 1.25-year low, reflecting deepening negative momentum in the cryptocurrency market, with approximately $2 billion flowing out of Bitcoin ETFs in the past month, signaling a decline in investor confidence.
- Earnings Season Impact: Despite 150 S&P 500 companies set to report earnings this week, market focus on economic data intensifies, with S&P 500 earnings expected to grow by 8.4% in Q4, yet overall market sentiment remains suppressed by recent economic weakness.
See More
