The cost of protecting Nvidia debt against default surged by the most on record, marking a sharp reversal in the market’s earlier optimism around AI growth.

Investors, who had been bullish on AI‑driven earnings, now face higher yields and greater risk of default as valuations tighten across the sector.

The spike reflects a broader trend of tech stock sell‑offs, with companies like Nvidia and peers seeing liquidity sour as borrowing costs climb and investor sentiment shifts.

Analysts warn that continued tightening could force firms to refinance at steep rates or cut dividends, potentially slowing the AI boom that has driven recent equity rallies.

Market makers have adjusted pricing models to account for the elevated default risk, which has pushed the cost of credit protection for Nvidia’s bonds to levels unseen in the past decade.

While some investors seek safety in government bonds, others look to hedge with credit default swaps, though the premiums for covering Nvidia’s exposure remain high.

In the coming weeks, analysts will closely watch Nvidia’s quarterly guidance and macroeconomic data for clues about whether the sector can sustain its current growth trajectory without further debt‑related stress.

The broader implication is a reminder that AI hype does not guarantee immunity from market corrections.