Private equity poured trillions into software companies between 2018 and 2022. Every single one of those deals is now underwater “and probably by a lot,” according to Steve Eisman, the fund manager who called the subprime crash before anyone wanted to hear it.

The SaaS Model Is Breaking

The software-as-a-subscription model that powered a multi-decade bull market depended on two assumptions: growing seat counts and annual price increases. AI threatens both. Software multiples have been cut in half, and for the first time in decades, price-to-earnings ratios for software stocks sit below the broader market multiple.

Adobe (NASDAQ:ADBE) and ServiceNow (NASDAQ:NOW) fell 31% and 32%, respectively, during Q1. The infotech sector dropped 9% overall, dragging the S&P 500 to a 4% quarterly loss.

A $200 Billion Debt Wall

The pain extends well beyond public markets. Apollo Global Management (NYSE:APO) co-head of PE David Sambur warned in February of a “multi-car pileup” on the software investing highway. Bloomberg reported this week that more than $200 billion in leveraged technology debt is coming due through 2028, just as what analysts are calling the “SaaSpocalypse” threatens to revalue entire portfolios.

PE firms bought the software companies. Private credit funds, many operated by those same firms, financed the deals. Now both sides are bleeding.

Blackstone (NYSE:BX), KKR (NYSE:KKR), and Carlyle Group (NYSE:CG) were all down 25% or more in Q1. Oaktree’s Howard Marks warned last week that private credit underwriting standards were “too low and setting the scene for a correction.”

Prediction Markets Price The Fallout

Eisman flagged 4.5% on the 10-year Treasury as the level where equities consistently break down, and the Iran war pushed yields to 4.4% before the ceasefire.

However, rate relief may not be coming. On Polymarket, traders price a 42% chance of zero rate cuts in 2026 after March CPI surged to 3.3%. Without lower rates, PE firms sitting on leveraged software deals bought at peak valuations have nowhere to refinance.

The U.S. recession contract prices a 25% chance of a downturn by year-end on $1.3 million volume.

The AI Bubble Burst contract gives 16% odds of industry-wide collapse by December.

Earnings season starts next week. Apollo, Blackstone, and KKR will all have to answer for their software books.

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