Last year, buyout firms poured record cash into software. This year that cash has nearly dried up.
The cause is not rates or a slump. It is AI.
The Freeze
Software deals are running at just $50 billion so far in 2026. A year ago that figure was $88 billion.
That makes it the slowest start since the pandemic. The data comes from PitchBook, by way of the Financial Times.
The drop stings because 2025 was a record. Firms struck $290 billion in software deals, an 11-year high.
This year is on track to be the weakest since 2018. That is a fast fall.
AI is quietly reshaping where the big money goes, and Market Briefs tracks those shifts every morning in five minutes - plus a free investing masterclass when you join.
Why Buyers Are Backing Off
Private equity, by the way, means buying firms, fixing them up, and selling them later. To pay up, a buyer needs to guess a firm's future worth.
AI makes that guess almost impossible for software. It is like pricing a house when a highway might go up next door, or get torn down.
One banker said it well. "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," said Paul-Noel Guely of Arma Partners.
In plain terms, nobody wants to overpay for a firm that AI might wreck.
Buyers now have to sort the field. Some software gets stronger with AI, and some gets replaced by it.
Telling the two apart is the hard part. It barely mattered two years ago.
The Discount Problem
Some funds have simply paused new software bids. That sorting will shape the next wave of deals.
When buyers get nervous, they ask for a lower price. That is just what is happening.
They now want discounts of up to 20% to take software off sellers' hands. A few weeks back, that discount was closer to 5%.
Some deals still close, but at a markdown. Sellers either wait it out or take the cut.
Much of the fear traces to AI agents. These tools can do routine office work on their own.
The worry grew early this year when Anthropic showed off new work tools. Big pushes from Amazon and OpenAI soon followed.
That matters because many software firms charge per worker. If an agent does the job, that model looks shaky, and fewer seats can mean less money.
What To Watch
The big question is simple. Is this a short pause or a real reset?
Buyers are not refusing to deal. They just cannot price the risk yet.
Once they know which software lives through AI, the cash should move again. For now, the checkbooks stay closed.
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