Credit default swap costs on big AI borrowers reach highest since 2021
For the chief credit officer at a large bank
The cost to insure the bonds of Amazon, Alphabet, Microsoft, Meta and Oracle against default has risen to its highest level since 2021, The Wall Street Journal reported, citing bond data provider Solve, according to an Nov. 1 AI Weekly summary.1
AI Weekly, summarizing The Wall Street Journal's reporting, did not give a single cause; it said multi-asset and equity managers increasingly use CDS as a cost-effective hedge against AI exposure, helping push prices to records, and the Journal's headline cites AI build-out fears.1 Multi-asset and equity managers "increasingly use CDS, traditionally used by credit investors, as a cost-effective hedge against AI exposure," the reporting notes, which helped push prices to records.1
Oracle's five-year CDS spread widened to a record 288 basis points, while Meta reached 108 and Nvidia 101, both records, according to the summary.1
Protection on Alphabet and Amazon is at all-time peaks, and Microsoft spreads have also climbed, the summary said.1
More than $9 billion of CDS tied to Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia changed hands on average each week in September, up from less than $2 billion in July.1
AI-linked companies have raised $466 billion in debt so far in 2026, compared with $101 billion in the same period in 2025, and the five biggest hyperscalers issued $121 billion in US corporate bonds last year against an average of $28 billion a year from 2020 to 2024.1
CDS prices on these issuers may reflect equity hedging as much as credit fear, so banks should read them as a noisy signal. S&P cut Meta's credit outlook to negative within days of the move, and banks that hold loans or bonds from these borrowers carry exposure that equity managers' hedges do not cover.
Our take. The market now charges a record 288 basis points to insure Oracle's debt, while AI-linked borrowing has hit $466 billion this year. A bank still sizing hyperscaler limits on 2021 spreads is pricing yesterday's risk.
Action. Credit risk: Re-run concentration limits and stress tests on hyperscaler and AI data-centre loans at current CDS spreads, starting with Oracle.
From our records
- NVIDIAvendor · banks using it (6) BNY, Amex, Capital One · alternatives SambaNova