Key Takeaways
- • Trading in credit default swaps tied to major technology issuers surged, with more than $9bn of CDS on debt from Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia trading weekly on average in September, up from less than $2bn in July, according to Morgan Stanley Research.
- • AI-related borrowing has risen sharply, with companies raising an estimated $466bn so far in 2026 versus $101bn over the same period last year.
- • Five-year CDS spreads hit records for Meta (108bps) and Nvidia (101bps) this month, Oracle's spread reached 322bps on Monday (more than double its start-of-year level), and SpaceX CDS reached a record 226bps.
- • CoreWeave is the sharpest outlier, with five-year CDS near 1,090bps; protection on $10m costs $1.82m upfront plus $125,000 quarterly.
- • Polus Capital's Robert Dafforn warned that high leverage and interconnected AI financing could amplify losses if weaker borrowers run into difficulty.
Summary
Trading in credit default swaps (CDS) linked to major technology companies has surged as investors seek protection against a possible reversal in the AI investment boom, according to a report by the Financial Times. Morgan Stanley Research data show more than $9bn of CDS referencing debt issued by Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia traded weekly on average in September, compared with less than $2bn in July.
The activity tracks a sharp rise in AI-related borrowing. Companies have raised an estimated $466bn so far in 2026, against $101bn over the same period last year. Concerns over leverage, concentrated exposure and the profitability of AI infrastructure investment have pushed up the cost of default protection. Credit derivatives are also drawing interest from multi-asset and equity investors looking for cheaper alternatives to equity put options to hedge technology exposure.
Spreads have widened across the group. Five-year CDS on Meta and Nvidia reached record highs of 108 and 101 basis points this month. Oracle's spread climbed to 322 basis points on Monday, more than double its level at the start of the year, and SpaceX CDS reached a record 226 basis points.
The sharpest deterioration has been at AI cloud infrastructure provider CoreWeave, where some bonds have fallen into distressed territory. Five-year CDS spreads have reached roughly 1,090 basis points, meaning investors must pay $1.82m upfront to secure $10m of protection, plus quarterly payments of $125,000.
Robert Dafforn, chief investment officer at distressed debt specialist Polus Capital, warned that high leverage and interconnected financing arrangements across the AI sector could amplify losses if weaker borrowers encounter difficulties. The widening spreads reflect growing doubt about the sustainability of AI-related capital expenditure, with credit derivatives increasingly serving as a barometer of investor sentiment toward the sector.
The activity tracks a sharp rise in AI-related borrowing. Companies have raised an estimated $466bn so far in 2026, against $101bn over the same period last year. Concerns over leverage, concentrated exposure and the profitability of AI infrastructure investment have pushed up the cost of default protection. Credit derivatives are also drawing interest from multi-asset and equity investors looking for cheaper alternatives to equity put options to hedge technology exposure.
Spreads have widened across the group. Five-year CDS on Meta and Nvidia reached record highs of 108 and 101 basis points this month. Oracle's spread climbed to 322 basis points on Monday, more than double its level at the start of the year, and SpaceX CDS reached a record 226 basis points.
The sharpest deterioration has been at AI cloud infrastructure provider CoreWeave, where some bonds have fallen into distressed territory. Five-year CDS spreads have reached roughly 1,090 basis points, meaning investors must pay $1.82m upfront to secure $10m of protection, plus quarterly payments of $125,000.
Robert Dafforn, chief investment officer at distressed debt specialist Polus Capital, warned that high leverage and interconnected financing arrangements across the AI sector could amplify losses if weaker borrowers encounter difficulties. The widening spreads reflect growing doubt about the sustainability of AI-related capital expenditure, with credit derivatives increasingly serving as a barometer of investor sentiment toward the sector.
Go deeper than the headline
Research every firm in this story, track the ones that matter and get the daily briefing — free for 7 days.