In April last year, investors questioned Alphabet’s AI moat, but since then, the stock has nearly tripled in value, adding over $2.5 trillion to its market capitalization. This week, the company issued 100-year bonds to strong demand, further solidifying its position as a leader in the tech industry. However, despite this impressive growth, software companies continue to face pressure on their valuations, with Goldman’s Wilson pointing out several key trends in the credit market.

According to Wilson, over the past decade, private equity firms have taken around 1,900 software companies private for a staggering $440 billion. The tech sector saw the highest share of leveraged deals with a multiple of over 6x. This indicates that investors are confident in the growth potential of these companies, despite any short-term challenges they may face.

However, Wilson also notes that loan market stress is on the rise. Only 20% of loans currently trade above par, while 22% trade below 90 cents, more than double the number from last year. This trend is particularly concerning for software and tech companies, which account for 16% of the loan index and 21% of BDC portfolios. Furthermore, these companies also make up 21% of 2025 restructurings and distressed exchanges.

While Alphabet’s AI moat may have helped the company weather the storm, it is clear that software companies still face headwinds in the credit market. As investors continue to scrutinize these companies’ valuations, it will be interesting to see how they navigate this challenging landscape.