BlackRock just proved that in private credit, the distance between “perfectly fine” and “worthless” is roughly 90 days.

Investors were jolted by the investment giant’s recent writedown of a $25 million loan to an Amazon storefront aggregator from 100 cents on the dollar to nothing. It had marked the loan on par three months ago.

Roaches and Dumb Things

Concerns about defaults in the massive $2 trillion private credit market were magnified last fall, when auto parts manufacturer First Brands collapsed, leaving many in the industry exposed. Soon after, JPMorgan CEO Jamie Dimon famously quipped, “When you see one cockroach, there are probably more,” implying other bad loans are out there. Private credit’s opaque nature can make it hard to identify. The industry rapidly expanded in the last decade as banks reduced their exposure to leveraged lending. In their place, private equity firms and asset managers began lending to middle-market companies under terms that aren’t publicly disclosed, typically with floating interest rates.

The wider financial system has also taken on exposure over time. Moody’s estimates banks hold roughly $300 billion in loans to private credit issuers and have made hundreds of billions more in commitments. All of this is why some investors are hyper-sensitive to private credit writedowns, even a relatively small $25 million blip like the one BlackRock quietly disclosed in an SEC filing on February 27. Dimon has more recently pointed to the obvious parallels with risky loans made in the lead-up to the 2008 financial crisis, many of which were declared worthless overnight. Last month, he warned of “people doing some dumb things … to create [net interest income].”

Private credit default fears are also mounting because of the industry’s exposure to software businesses whose products could be replaced by “agentic” artificial intelligence tools:

• In January, analysts at UBS estimated 25% to 35% of the private-credit market was exposed to AI disruption, while analysts at iCapital earlier estimated that software companies account for roughly 20% of outstanding private-direct lender loans.
• The iShares Expanded Tech-Software Sector ETF is down 18% this year, reflecting investor pessimism about software businesses.

But Wait, There’s Upside: This week, short sellers have piled on bets against private credit shop Blue Owl Capital, which announced plans to sell $1.4 billion in assets last month to pay down debt and return capital to investors. As for BlackRock, its shares slid 1.4% Thursday amid news reports of the writedown. Still, Eric Clark, a portfolio manager at LOGO ETF, told Barron’s he believes private credit pessimism is “creating a very rare opportunity to enter a high quality business” when it comes to the most sophisticated and diversified asset managers, which he said “do better research, set better terms, and have incredible default work-out capabilities to not lose the money people think they will lose.”

A neurotech startup just raised $230 million from investors for its mission: restoring eyesight to the blind. The round is said to have boosted Science Corp.’s valuation to $1.5 billion, making it the second-most-valuable brain-implant startup behind Elon Musk’s Neuralink.

Science’s PRIMA chip sits on the retina and pairs with specially designed glasses to project images back. The current version has been successful in treating patients with macular degeneration, and the company’s conducting clinical trials to see if its implant can help with Stargardt disease and retinitis pigmentosa, top causes of vision loss in younger patients.

The tech could be the biggest breakthrough in brain-computer tech since the cochlear implant to enable better hearing.

Racing to Market

CEO Max Hodak founded Science Corp after departing Neuralink, which he cofounded and where he served as president. Hodak said Science will be the first company to bring a brain chip to market, meaning it’ll get ahead of Neuralink, which is also working on vision-loss chips in addition to its other chips.

Science expects the EU to approve its CE mark application in mid-2026, and Germany is likely to be the first country in which its chips could go public. Science is in talks with the FDA to bring the chip stateside, where its past success in clinical trials could set it up for an expedited FDA breakthrough designation. But it’s not alone:

• Elon Musk said in January that Neuralink plans to start mass production of its brain interfaces this year. So far, the company said it has implanted 21 people with its chips focused on treating spinal cord injuries. Neuralink is also developing a vision-restoring chip that it said will be given to its first patient this year.
• There’s more competition beyond the top two brain-chip startups, including Synchron and Precision Neuroscience. Companies focused on creating noninvasive brain-computer interfaces, like Sam Altman’s Merge Labs and its ultrasound devices, are also racing to develop their tech.

Big Brain Moves: Neuralink has generated the most buzz for the industry in viral videos showing how brain implants can help a monkey play “Pong,” and later, help humans with spinal cord injuries. That hype’s helped legitimize the tech, which may’ve seemed like sci-fi not long ago. And recent funding rounds show that venture capitalists take the sector seriously, too. Getting approval and actually heading to market are the next hurdles for brain interface-makers, which competition and public anticipation could help speed up.

Even insurance companies can’t protect themselves against the rise of robots. But American International Group (AIG), a major player in property and casualty insurance, is faring better than most.

Analysts at Goldman Sachs upgraded AIG’s stock to buy from neutral, saying that it, along with Chubb, is better equipped to take on AI-related changes in the industry, thanks to its multinational and large account business mix that largely avoids products where demand may shrink over time. The analysts also raised the stock’s 12-month price target by $7 (or 8%) to $90.

Allstate wasn’t so lucky. The Goldman analysts downgraded the company’s stock to neutral from buy and cut the 12-month price target by $7 (or 3%) to $231. They are concerned, in part, about the insurer’s competitive positioning in AI, given its impact on policy distribution and autonomous vehicles.

Risk and Potential Reward

Artificial intelligence is threatening to upend the property and casualty insurance business. It can analyze mass datasets that insurance companies use to measure risk, trim human agents from the equation as bots offer customers instant quotes, reduce the actual risk people face (by potentially limiting car crashes with autonomous vehicles) and more.

That puts insurance companies at an inflection point. They can fall behind or harness the power of the new technology to better their business:

• “To create lasting business value from AI, insurers … will need to completely retool workflows, rethink operating models, work toward a modern data and tech stack, and scale AI by harnessing reusable components for various use cases and business areas,” experts at McKinsey wrote last year. “And they will need to do this in a manner that creates meaningful improvements in unit economics.”
• AIG is getting ahead. As AI tools help to reduce time requirements and increase accuracy in both underwriting and claim evaluation, AIG has “highlighted that a generative AI tool is allowing AIG employees to underwrite a greater percentage of the policies submitted by brokers in certain segments,” the Goldman analysts wrote.

Winners and Losers: While AIG and Chubb are best positioned amongst commercial insurers (and all the companies Goldman covered in its analysis) to take on AI risks and opportunities, Aon and Ryan Specialty are best positioned amongst insurance brokers, the firm says. Personal line insurer Progressive joins Allstate as least well-positioned.