Private Credit Defaults Would Hit 13% in UBS Worst Case for AI

UBS is warning that in a worst‑case scenario where artificial intelligence causes severe business disruption, default rates in US private credit could rise to about 13%, notably higher than in other corporate debt markets.

What UBS is saying

• UBS strategists model an “aggressive AI disruption” case in which many borrowers’ business models are undermined by AI, leading private credit defaults to climb to roughly 13% in the US.

• In the same scenario they see default rates of up to about 8% for leveraged loans and 4% for high‑yield bonds, implying private credit is more exposed to AI‑sensitive borrowers.

Why private credit is more exposed

• UBS estimates that roughly one‑third of the US private credit market is tied to technology and services that are directly exposed to AI risk, so a shock in those areas hits private credit first.

• Private credit has been an important funding source for AI‑linked projects such as data centers, and overall lending to AI‑related firms has already exceeded about 200 billion dollars, with potential to reach 300–600 billion dollars by 2030, which concentrates AI risk in this asset class.

Worst case vs base case

• UBS describes this 13% default rate as a tail‑risk, “worst‑case” AI scenario rather than its base expectation for the market.

• Their broader work on private credit suggests defaults could rise and remain elevated in the near term, but they also expect conditions to stabilize by around late 2026 if macro trends and AI adoption evolve more moderately.