The recent “AI scare trade” has driven meaningful volatility across equities and spilled into private credit and BDC stocks. The S&P Software & Services index has erased roughly $2 trillion in value since October, with about half of that decline occurring in just the past few weeks. Several BDCs with perceived technology exposure have sold off sharply, including Blue Owl Capital Corp (OBDC) and TriplePoint Venture Growth (TPVG), and even sector bellwether Ares Capital Corporation (ARCC) is lower. However, Q4 2025 earnings data across major platforms does not support the thesis of a broad credit breakdown. Instead, the evidence points to equity valuation compression in software, earnings normalization ahead of lower base rates, and sentiment-driven volatility rather than systemic impairment.

Across large platforms, credit metrics remain constructive. At ARCC, portfolio company EBITDA growth remains solid, non-accruals are stable, andsoftware loan-to-values in the mid-30% range provide a meaningful equity cushion. Trinity Capital Inc. (TRIN) framed the environment as “credit risk versus return risk”: borrower performance remains steady, but declining SOFR and competitive spreads may compress forward returns. Golub Capital BDC, Inc. (GBDC) reduced its dividend, broadly anticipated by the market, reflecting earnings normalization rather than portfolio stress. Management emphasized that AI-driven growth risk may pressure equity valuations before it impairs debt, particularly in granular, cash-flowing portfolios. Dividend resets among “Level 2” BDCs are generally modest and often reflect prudent positioning in a lower-rate environment.

Among recent earnings releases, Hercules Capital, Inc. (HTGC) delivered approximately 120% dividend coverage, maintained supplemental distributions, and saw non-accruals decline to near de minimis levels. Its underwriting remains conservative, with low LTV targets, sub-1x ARR attachment points, short loan duration, and avoidance of pure-play AI infrastructure exposure. Sixth Street Specialty Lending, Inc. (TSLX) maintained strong coverage and low non-accruals, with its modest NAV decline largely driven by equity mark-to-market adjustments rather than broad credit deterioration. Carlyle Secured Lending, Inc. (CGBD) has repositioned toward a higher first-lien mix, retains meaningful spillover income, and expects earnings to trough near term before improving as joint ventures ramp and leverage is optimized, though elevated PIK levels warrant monitoring.

Importantly, our own CEF Advisors Listed Large Cap Debt BDC – Equal Weight Index (≥$1B market cap, 16 constituents) reinforces the same conclusion. As of February 13, 2026, index price is down -13.2% (total return) over one year and -2.7% year-to-date, while NAV is up +8.6% (TR) over one year and +1.0% year-to-date, representing roughly a 22 percentage-point divergence between price and NAV performance. The index currently trades at approximately a -6.2% discount, with a 12.3% market yield, and portfolio composition still dominated by first-lien/senior secured exposure (~74%). Software exposure is approximately 12.5%, compared with roughly 10% for the S&P 500.

The 16 largest publicly traded BDCs represent more than $130 billion of capital deployed across 3500+ U.S. middle-market companies; a meaningful slice of the private credit market that trades daily on public exchanges.

For the 13 BDCs updated in CEFData through 12/31/2025 earnings results, non-accruals stand at approximately 1%. Fair market value marks vs. cost are at -1.8%, and one-year NAV return (excluding dividends) is -2.9%, while five-year NAV return remains positive at +1.1% (excluding dividends). Current return on equity is 8.3% versus a five-year average of 9.4%. In other words, market prices have weakened materially, but underlying NAV trends, portfolio composition and performance remain relatively stable — consistent with what management teams are communicating on earnings calls.

Risks remain as refinancing pressure could emerge if sponsors hesitate to contribute fresh equity at maturity. Certain single-product SaaS businesses and highly levered, ARR-based capital structures may face stress. Spread compression and lower base rates are also likely to moderate forward earnings. However, non-accrual formation remains contained across higher-quality platforms, equity cushions appear meaningful, underwriting standards remain disciplined across experienced managers, and sector technicals suggest oversold conditions (RSIs in the low 30s). At this stage, Q4 earnings reflect a valuation and earnings-cycle reset layered onto heightened AI-related sentiment — not evidence of a systemic private credit event. While earnings may trough in coming quarters, balance sheets do not currently reflect systemic stress, reinforcing that current volatility appears valuation-driven rather than credit-driven.

CEF Advisors, via its CEFData platform, offers public profile pages on all exchange listed BDCs, along with a comprehensive summary page covering the full universe of exchange-listed BDCs: https://cefdata.com/bdc-universe

About CEF Advisors

Closed-End Fund Advisors (CEF Advisors) is a Richmond, Virginia-based registered investment advisory firm founded in 1989, specializing exclusively in closed-end funds (CEFs), business development companies (BDCs), interval funds, and other listed income vehicles. CEF Advisors has covered BDCs on CEFData.com since February 2014, building one of the longest-standing independent research databases dedicated to the publicly traded BDC universe. Today, CEFData tracks more than 800 listed CEFs, BDCs, interval, and tender-offer funds representing over $1 trillion in assets, providing detailed analysis on discounts, NAV yields, leverage, distribution coverage, and structural dynamics.

In addition to research, CEF Advisors actively manages portfolios, including a BDC-focused strategy that has raised over $500 million since 2014. The firm’s disciplined approach integrates structure, valuation, and risk management — emphasizing that yield alone is not a strategy. CEF Advisors works with financial advisors, institutions, and high-net-worth investors seeking data-driven exposure to the listed credit and income markets.

Disclosure:BDC investments involve credit risk, leverage risk, interest-rate risk, valuation risk, and market volatility. Dividends are not guaranteed and may be reduced. This commentary is for educational purposes only and is not investment advice. Past performance is not indicative of future results. Data as of 2/16/2026 on CEFdata unless otherwise noted.