Rising AI Risks for Software, Media & Services 📈

A new report from Fitch Ratings highlights that AI-driven credit risks are intensifying, particularly for asset-light sectors driven by intangibles and human capital. While most sectors remain stable, specific high-tech areas face structural shifts. • Sector Impact: Software, Media, and Services face the highest disruption risk. AI-enabled substitutes are lowering entry barriers, potentially squeezing margins and increasing competition. • Resilience Factors: Companies with mission-critical functions, high switching costs, and proprietary data are expected to be more resilient. Financial flexibility to invest in AI and strategic acquisitions is now a key competitive moat. • Investment Trends: Overinvestment risk is largely confined to hyperscalers. For broader North American corporates, capex intensity is projected to rise only modestly to 7.4% of revenues in 2025-2026 (up from 6.0-7.0% previously). • Credit Outlook: AI is not a near-term rating driver for most of the 14 sectors reviewed. Adoption remains gradual and efficiency-focused, with traditional financial structures still dominating credit outcomes. • Sri Lankan Context: As the local ICT/BPM and software development sectors seek global expansion, maintaining proprietary IP and high-value integration will be vital to mitigating these emerging global AI risks.