AI Spending Surges as Big Tech CDS Spreads Hit Record Highs
Alina Collins
Credit default swaps on Oracle, Nvidia, Alphabet and peers have hit all-time highs, as bond markets price in growing doubt that AI mega-spending will ever pay for itself — the money is going out, but nobody can say when it comes back.
CDS at record highs — what is the market actually saying?
A CDS — credit default swap — is essentially default insurance on a company's debt. The higher the price, the more the market worries about repayment.
Per LSEG data, CDS on Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia have all hit record levels.
This means → the credit-risk repricing is not company-specific. It is a sector-wide reassessment of Big Tech's balance-sheet trajectory.
Oracle: $70 billion on data centres, one notch above junk?
Oracle's five-year CDS hit 215 basis points on Monday, up from 144 bps at the start of the year — a near-50% jump in six months.
In plain terms = investors now pay $215,000 per year to insure $10 million of Oracle debt against default.
Oracle announced last month it will spend $70 billion on data centres over the next year. S&P promptly cut its rating to BBB- — one notch above junk — citing uncertain earnings visibility amid massive AI investment.
This reflects a straightforward concern: spending is certain, but the revenue path is not.
Nvidia and Alphabet: even cash-rich giants are not immune
Nvidia's five-year CDS touched a record 79 bps. The Wall Street Journal reported Nvidia is in talks to provide a $250 billion guarantee for an OpenAI data-centre project; Nvidia declined to comment.
Alphabet's CDS, trading only since late November, rose to a record 67 bps — after its Q2 free cash flow turned negative for the first time in over two decades as a public company.
This means → even at the companies with the deepest cash reserves, AI spending is starting to outrun cash generation.
How did bond-market confidence crack? Meta's borrowing costs near junk level
Sona Asset Management CIO John Aylward: "Credit markets are bad at dealing with uncertainty, and the extreme unpredictability of AI financing pace and cost is creating a serious confidence crisis."
The latest financing for Meta's $12 billion Texas data-centre project came at sharply higher costs. Aylward noted the bonds "priced in line with where B- rated credits trade today."
In plain terms = Meta is an investment-grade company, yet it is borrowing for AI projects at costs normally reserved for near-junk issuers.
The central question: when does the money come back?
Neuberger Berman investment-grade bond co-head David Brown posed the question the market most wants answered: "Will this level of capex continue indefinitely? When do we see the positive free-cash-flow inflection point?"
His answer: "That answer isn't coming soon, which explains why the market is soft." He warned that "a lot of financing still needs to get done, and that could become a problem."
This means → the market weakness is not about doubting AI itself — it is about the certainty of spending far exceeding the certainty of returns.
CDS as the new bearish barometer for tech
DWS Americas fixed-income head George Catrambone noted that even though actual default probability remains low, investors are buying CDS to hedge against rating downgrades and volatility — "especially after seeing those capex numbers in earnings."
SocGen US equity strategist Manish Kabra went further: "For hyperscalers, watch the CDS, not the EPS."
In plain terms = the bond market has become the early-warning system for Big Tech's health — and until the gap between AI spending and cash returns narrows, credit-market pressure will not meaningfully ease.
Content is for reference only, not financial advice.