Investors are increasingly buying protection against potential defaults by major technology companies: credit default swap (CDS) prices for Microsoft, Nvidia, Meta and Amazon have risen significantly since autumn 2025. In some cases spreads have more than doubled, while CDS costs for Oracle and Broadcom have climbed by roughly 250 percent.
Why are spreads rising?
The spread widening is linked to record capital spending by large tech firms on data centers, chips and other infrastructure needed to run artificial intelligence. According to reports, Alphabet, Amazon, Meta and Microsoft plan investments totaling into the trillions of dollars over the coming years. In 2026 alone more than $450 billion of AI-related debt has already been issued on global bond markets.
Heavy capex is increasing leverage and, in some companies, has pushed free cash flow into negative territory. Markets are therefore scrutinizing whether anticipated AI revenues will be sufficient to service and justify these investments and the related rise in debt — a question reflected in CDS pricing.
What does more expensive CDS protection mean in practice?
A CDS is a financial contract that lets lenders and investors buy protection against a borrower's default. When market participants view a company as riskier, the premiums for that protection rise. However, higher CDS costs do not automatically signal an impending default among the largest tech firms; they mainly indicate growing market uncertainty about corporate financial prospects.
Smaller players show clearer warning signs
In some smaller, AI-infrastructure-focused firms the stress is already visible. Cloud provider CoreWeave saw its share price fall sharply in October: the stock dropped more than 9% on a Friday, leaving a weekly loss of about 23% as trading continued. CDS market pricing for the company implied a probability of default above 60 percent. Such cases illustrate that the return on AI investments is a more acute concern for smaller companies.
CDS markets and historical context
CDS market turnover reached a record $41.8 trillion globally in 2025. The role of credit default swaps came under the spotlight during the 2008 financial crisis, when contracts written on poor-quality mortgage debt caused severe losses and contributed to AIG’s rescue. That historical lesson informs current vigilance, but analysts say the present CDS widening does not by itself point to an imminent systemic financial crisis.
Who should watch this and why?
Banks have increased demand for CDS to hedge risks associated with lending to technology companies, and more investors are buying protection while hedge funds sell it to earn premium income. For lenders, investors and regulators the critical question remains whether future AI-related revenues will be large and durable enough to cover the massive expenditures and the growing issuance of debt.
Conclusion
Rising CDS costs are a clear market signal of increased skepticism about the payback from AI investments. While this does not equate to an immediate default risk for the largest tech firms, it highlights financial strain among smaller providers and underlines the importance of monitoring whether corporate cash flows will validate the substantial capital deployed into AI.
This article is not investment advice.
