Investors are rapidly buying credit default swaps to hedge against potential AI-driven defaults, with weekly trading volumes linked to major tech firms like Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom, and Nvidia surpassing $9 billion in September. This surge reflects growing unease over the trillions of dollars in borrowing used to fund AI infrastructure. The cost of CDS protection has hit record highs, even for companies like Microsoft, signaling broad market concern.
Analysts note that CDS is now a key bellwether for investor sentiment on hyperscaler funding and the broader AI trade. AI-linked debt issuance has soared to an estimated $466 billion in 2026, up from $101 billion the previous year. The interdependent financing structures within the AI sector have heightened fears of a bubble, prompting even equity managers to use CDS as a cheap hedge.
Spreads for Meta and Nvidia have reached all-time highs, while riskier firms like Oracle and SpaceX see even steeper premiums.
Source: Financial Times Companies · Summarized by HeadlinesBriefing