Concerns are mounting over the creditworthiness of Big Tech companies as their spending on Artificial Intelligence soars. Prices for credit default swaps (CDS), used to bet against corporate debt, have surged to record highs for firms like Oracle, Nvidia, Alphabet, Amazon, Meta, and Broadcom, according to LSEG data. This reflects investor unease about the massive investments in data centres, chips, and AI models, which are financed by substantial debt issuance.

"Credit markets don’t deal well with uncertainty, and the sheer unpredictability of the pace and cost of AI financing is triggering a serious crisis of confidence right now," noted John Aylward, chief investment officer at Sona Asset Management. Meta's recent borrowing costs for its $12bn Texas data centre are nearing junk-rated bond levels, a situation Aylward described as "remarkable."

Oracle's CDS costs have risen significantly, prompting S&P Global Ratings to downgrade its credit rating to triple B minus. "The big question is, will this level of [capital spending] grow in perpetuity and when is that inflection point where we will see positive cash flow again?" asked David Brown of Neuberger Berman. The concern extends to Nvidia, which is reportedly considering a massive guarantee for an OpenAI data centre project. Alphabet's CDS also hit a new high after its free cash flow turned negative for the first time in over two decades.