Wall Street 'insures' AI debt: related companies raise $466 billion this year, Meta and Nvidia CDS costs hit record highs

October 20 — As AI infrastructure buildout drives large-scale debt issuance by tech companies, investors are increasingly allocating to credit default swaps (CDS) to hedge related debt risks. Morgan Stanley data shows that AI-related companies have issued approximately $466 billion in debt this year, 4.6 times the $101 billion in the same period last year. In September, CDS linked to bonds of Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom, and Nvidia averaged more than $9 billion in weekly trading volume, compared with less than $2 billion in July.

The cost of credit protection for tech giants continues to climb. Meta's five-year CDS spread rose to 108 basis points, and Nvidia's to 101 basis points, both hitting record highs; related indicators for Alphabet and Amazon also rose to record levels. Oracle's five-year CDS spread rose to 322 basis points, while SpaceX reached 226 basis points.

AI cloud service provider CoreWeave is under even greater pressure, with its five-year CDS spread having risen to about 1,090 basis points, and some of its bonds falling into distressed debt territory. Analysts noted that the AI industry has high financing leverage and close financial and business ties among companies, and the market is reassessing whether massive capital expenditures can translate into sufficient cash flow and profits. CDS and free cash flow have become important indicators for measuring AI investment risk, and related credit risk is spreading from individual companies to the entire AI industry chain.