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AI Risk Puts $1 Billion in Software Investments Under Review

Investment firm Ares Management has found that $1 billion of its software investments face a 'medium' risk from AI. This news shows how AI is changing the way investors think about the future of software companies.

1 min readLevel 4April 29, 2026

By Flalingo Editorial Team

Vocabulary

Study these words before reading the article. Click the audio button to hear pronunciation.

portfolio

/pɔːrtˈfoʊlioʊ/

noun

A collection of investments owned by a person or company

“The investor checked her portfolio every week to see how her money was growing.”

disruption

/dɪsˈrʌpʃən/

noun

A big change that stops something from working in the usual way

“The disruption caused by new technology forced many old businesses to close.”

classified

/ˈklæsɪfaɪd/

verb

Put into groups or categories based on certain qualities

“The teacher classified the students into three groups based on their test scores.”

allocation

/ˌæləˈkeɪʃən/

noun

The way something is divided or shared among different areas

“The company changed its budget allocation to spend more on marketing.”

confident

/ˈkɑːnfɪdənt/

adjective

Feeling sure that something is true or will happen

“The manager was confident that the new product would sell well.”

consultant

/kənˈsʌltənt/

noun

An expert who is paid to give advice to a company or organization

“The company hired a consultant to help improve its sales strategy.”

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Article

Click on any underlined word to see its definition. Highlighted words are from the vocabulary section.

Artificial intelligence is changing many industries very fast. Investors must now think about how AI might hurt software companies. Ares Management, a large investment firm, has reviewed its portfolio. It found that about $1 billion in software investments face risk.

An outside consultant studied the software holdings in the fund. The fund has a total portfolio worth $29.5 billion. The review classified 85% of software investments as low risk. However, 14% were rated as medium risk from AI disruption. Only 1% was marked as high risk.

Ares also reduced the value of loans to three companies. These companies lost 13 to 18 cents on the dollar. The fund's total unrealized losses reached $357 million this quarter. Software and services make up 22% of the whole portfolio. This is the fund's largest sector allocation.

Despite these concerns, Ares leaders remain confident about the future. They believe most software companies in their portfolio are strong. These firms have stable cash flows and loyal customers. AI disruption might also create new opportunities for smart investors. The firm plans to keep watching AI risks very closely.

Comprehension Quiz

Test your understanding of the article with these multiple-choice questions.

1
How much of Ares Capital's software investments face at least 'medium' AI risk?
2
What percentage of the software portfolio was classified as low risk?
3
What is the total value of Ares Capital's portfolio?
4
What percentage of the portfolio is in software and services?
5
How do Ares leaders feel about the future of their investments?

Discussion

Answer these comprehension questions about the article.

1
How much money in software investments did Ares find to be at risk from AI?
2
What percentage of the software portfolio was classified as low risk by the consultant?
3
Why did Ares reduce the value of loans to three companies?
4
What is the total size of Ares Capital's investment portfolio?
5
How does Ares plan to deal with the risks that AI brings to software companies?

Further Discussion

Share your opinions on these open-ended questions.

1
If you were an investor, would you still put money into software companies today? Why or why not?
2
Do you think AI will help or hurt most businesses in the next five years?
3
How should a company decide if a new technology is a risk or an opportunity?
4
Would you feel confident investing in a fund that has 22% of its money in one sector?
5
What steps should business leaders take to protect their companies from AI disruption?