US speculative‑grade debt increasingly concentrated in software and tech, Deutsche Bank warns

Deutsche Bank’s research team says software and technology have become outsized risk clusters within the US speculative‑grade debt universe, with exposure estimates in the high hundreds of billions and a share of the overall pool in the mid‑teens. That concentration is visible across multiple instruments — high‑yield bonds, leveraged loans and private credit — widening the pathways by which sector stress can propagate through markets. Recent market behavior has begun to corroborate those structural concerns: lenders have reported roughly $18 billion more in problem loans tied to software firms over a compressed window, and fixed‑income desks are tightening pricing and demanding higher yields on securities linked to weaker software credits. Smaller, single‑product vendors and firms with heavy professional‑services revenue appear particularly vulnerable, while high‑margin platform businesses with strong free cash flow have continued to access capital more cheaply. The squeeze is compounded by supply‑side dynamics — concentrated hyperscaler and cloud procurement, chip delivery bottlenecks and the near‑term costs of onshoring capacity — which raise capex requirements and shorten deployment windows for compute‑intensive projects. Those pressures are raising provisions at banks, increasing workout activity, and producing more covenant amendments; private‑credit funds are reporting mark‑to‑market losses and greater difficulty syndicating positions. Secondary‑market illiquidity and tougher public‑debt terms are nudging some issuers toward private placements or equity solutions instead of broad public issuance, altering refinancing pathways and potentially concentrating risk inside less‑liquid parts of the market. For active managers, the bank’s note and recent lender data imply higher idiosyncratic and sector risk inside portfolios that nominally target broad speculative credit exposures. Risk officers should revisit stress scenarios, concentration limits and capital planning to reflect sectoral clustering rather than relying solely on aggregate leverage measures. At a systemic level, clustered exposure in software and technology raises the odds that negative shocks to earnings or funding will produce faster, larger repricings and funding strains that spill into other borrowers and funding markets. Deutsche Bank’s analysis does not predict an imminent wave of defaults, but it reframes the debate: sector composition matters materially for assessing speculative‑grade vulnerability and should inform both investment and regulatory surveillance.