๐Bloomberg TechnologyโขStalecollected in 59m
Apollo Screens Software Investments for AI Disruption Risk
๐กLearn how top-tier asset managers are evaluating software companies for AI-driven obsolescence.
โก 30-Second TL;DR
What Changed
Systematic screening of software investments for AI risk
Why It Matters
This signals a shift in venture capital and private equity, where AI-resilience is becoming a key metric for software valuation.
What To Do Next
Audit your product's roadmap to ensure you have a clear 'AI-moat' that prevents your core features from being commoditized by foundation models.
Who should care:Founders & Product Leaders
Key Points
- โขSystematic screening of software investments for AI risk
- โขFocus on business model obsolescence due to AI
- โขAsset managers taking proactive steps against AI disruption
๐ง Deep Insight
Web-grounded analysis with 10 cited sources.
๐ Enhanced Key Takeaways
- โขApollo Global Management's AI risk assessment framework categorizes software into 12 to 14 segments, ranking them based on their vulnerability to AI disruption, and was applied to both new and existing portfolio investments in 2025.
- โขThe firm has been systematically reducing its exposure to software investments, aiming to decrease software holdings in its direct lending funds from approximately 20% of net assets in early 2025 to under 10% by early 2026.
- โขApollo identifies 'generic' or 'less-differentiated' SaaS products, especially point solutions with seat-based pricing, as facing the highest disruption risk, while highly regulated sectors like healthcare are considered more protected due to adoption barriers.
- โขBeyond risk mitigation, Apollo is actively pivoting towards AI infrastructure, including launching a new AI compute infrastructure platform in June 2026 in partnership with Broadcom and Blackstone.
- โขThe firm's co-President, John Zito, views AI as a 'hyper-deflationary' force that makes risk difficult to price, leading Apollo to prioritize resilient asset allocation in areas like Treasurys and hard assets.
๐ฎ Future ImplicationsAI analysis grounded in cited sources
Investment firms will increasingly shift capital towards 'Hard Assets, Low Obsolescence' (HALO) sectors.
The perceived 'hyper-deflationary' nature of AI and its disruption of asset-light, knowledge-worker-based software models will drive a preference for tangible, durable assets.
The software industry will see a continued divergence between highly differentiated platforms and commoditized point solutions.
AI's ability to replicate generic tasks will erode pricing power and increase competition for undifferentiated software, while platforms with essential workflows, unique data, or deep industry expertise will strengthen their market position.
Significant capital investment in digital infrastructure will be critical for the sustained growth of the AI revolution.
Trillions of dollars are estimated to be needed by 2030 for data centers, power infrastructure, chips, and servers to support AI's ambition, and the ability to translate AI disruption into recurring revenue and free cash flow will determine the revolution's durability.
โณ Timeline
2025
Apollo created and applied a new AI risk assessment framework to its existing and new software investment opportunities.
2025-02
Apollo began systematically reducing software holdings in its direct lending funds, targeting a reduction from ~20% to under 10% by early 2026.
2026-02-13
Apollo published an insight piece, 'AI and the Next Phase of the Software Cycle,' detailing AI's impact on SaaS business models.
2026-03-25
Apollo published 'The Balance Sheet Behind the AI Revolution,' discussing the shift towards 'Hard Assets, Low Obsolescence' (HALO) investments.
2026-06-10
Apollo launched a new AI compute infrastructure platform in partnership with Broadcom and Blackstone.
๐ Sources (10)
Factual claims are grounded in the sources below. Forward-looking analysis is AI-generated interpretation.
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Original source: Bloomberg Technology โ