First AI came for Software, disrupting its various offshoots and sparking a brutal bear market at the start of the year before a powerful squeeze sent software stocks surging in recent weeks. Now, it's the turn of professional services, including law firms, accountancies and consulting firms, which according to Apollo’s co-president, Scott Kleinman are likely to be the next sector to face disruption from artificial intelligence.

Investors have had their worries focused on the software sector, and the extent to which AI will upend these businesses. But going forward, buyout shops should be looking at investments in professional services, Kleinman said on a panel at the SuperReturn conference in Berlin on Wednesday, according to Bloomberg. 

“Apologies to the lawyers, accountants, consultants in the room, but I do think that’s a place where you’re going to see a lot of pressure,” Kleinman said, noting that Apollo is now "massively underweight" software and is directing capital toward critical infrastructure and less exposed business, reflecting a defensive credit stance. 

Private equity shops have funneled money into professional services firms, particularly accountancies, in recent years as many have looked for new sources of cash. Cinven, for example, bought a majority stake in Grant Thornton’s UK business in 2024.

Going forward, buyout firms should evaluate whether any professional services companies they’ve invested in can be replaced or supplemented by AI, Kleinman said.

Which is not to say that AI is done with software: Kleinman said that the software sector still poses an issue for private equity firms, many of which haven’t marked down their investments in the space at the same rate as the public markets have.

While software companies aren’t “going away,” ones that are “AI-native” are “going to put enormous pressure over time on legacy software businesses,” he said.

“The private equity industry fell in love with software, decided to pay ungodly prices for these businesses on the assumption that they keep growing forever and their margins would keep expanding forever,” Kleinman said. “But as we know, nothing grows to the moon. It’s a question of what is the next buyer going to pay for these companies and is it going to look anything like the multiple you paid for it?”