The panicking investors holding private credit funds sent shares of both Blue Owl Capital (OWL) and its BDC, OBDC, lower. Short-sellers hold a heavy bet against OWL stock. 14% of the short float is highly profitable for bears after they short-sold the asset manager.
OWL stock is down after its private credit unit faced $1.6 billion in redemption requests last month. It restricted the withdrawal to $1.4 billion. Its fund size is small compared to the total private credit market of $1.8 trillion.
Blue Owl is heavily exposed to the AI market. After cancelling its plans to lend $10 billion to Oracle (ORCL), skepticism about its lending business worsened. These troubles suggest that the AI sector could face a similar panic. The AI spending relies heavily on mega-cap firms like Meta Platforms (META), Google (GOOG), Microsoft (MSFT), and Amazon (AMZN), committing hundreds of billions of dollars in capital expenses.
Those firms, especially Meta and Amazon, cut tens of thousands of jobs to pay for AI data centers. If AI investments do not pay off, those firms will not only cut their spending but will also discourage others from doing the same.
In the software sector, UiPath (PATH) traded at lower prices. Shorts hold a nearly 25% short float against the firm’s stock. Despite posting annual recurring revenue growth last quarter and stability ahead, investors dumped the stock.
