Credit-default swaps are experiencing a significant resurgence, driven by the AI frenzy and the massive borrowing required for AI infrastructure spending. Investors are increasingly using CDS to hedge against potential defaults in the event the AI boom unravels. The market has seen a surge in trading volumes, with CDS on major tech companies that didn't exist a few years ago now taking off.
Nvidia's CDS is quoted at 141.5 bps, costing $141,500 annually to insure $10mn of debt. The AI cohort now accounts for nearly 14% of open interest for Americas corporate single-name CDS, up from 4% a year ago. Oracle leads in market size and activity, while Core Weave stands out for its exceptionally high CDS prices.
Source: Financial Times Markets · Summarized by HeadlinesBriefing