Private equity’s software buying spree has hit the skids as AI makes investors wonder what anything is worth.
According to the Financial Times, software buyout deals have fallen to their lowest level since the Covid-19 pandemic, as AI disruption spooks a sector that private equity loved last year.
The value of software deals dropped to $50 billion in the first five months of 2026, down from $88 billion in the same period last year, according to PitchBook data. That makes it the weakest first five months since 2020, when the pandemic gave financial markets a nasty kicking and walloped the global economy.
Industry executives said the fall reflects more than a wobble over valuations. They think AI could reshape software business models and leave buyout firms guessing which companies survive the shift.
Arma Partners specialist tech banker Paul-Noël Guély said: “Until an investor knows what a business may be worth post-AI adoption, it’s impossible for them to make a case to their investment committee.”
The uncertainty is a sharp reversal from the past decade. Software companies were once prized for recurring revenue and customers who often had little choice but to keep paying.
Private equity firms struck $290 billion worth of software buyouts last year, the highest total for 11 years, according to PitchBook. The mood has changed fast. If the first five months continue at this pace, 2026 will be the weakest year for software dealmaking since 2018.
Concern grew at the start of the year after US outfit Anthropic launched productivity tools that challenge existing software programmes. Much of the fretting is about AI agents, tools that can do routine tasks and replace chunks of traditional software.
Analysts have warned that these tools could threaten business models based on the number of employees using a software programme.
Private equity groups are not the only ones looking queasy. Private credit funds, which have backed plenty of software companies, are feeling the same doubts. Private equity executives said firms are starting to draw clearer lines between software companies that are vulnerable to AI and those that might shrug it off.
