Bank stocks fall, as AI threats to tech loans rattle private credit

Financial stocks are selling off as investors weigh U.S. bank exposure to the $2 trillion private credit market. Anxiety stems from withdrawals in funds heavily invested in software and tech companies facing AI-driven disruptions.

Morgan Stanley and other major firms have capped redemptions as investors exit private credit funds. This pressure highlights the nearly $300 billion in credit lines banks provide to these lenders.

Banks face potential losses if private lenders must liquidate assets at a discount to meet redemptions.