Wall Street has found a new way to express doubts about the AI boom. Rather than shorting the stocks, traders are buying insurance on the debt.
The numbers behind the hedge
A credit default swap works a lot like a homeowner’s insurance policy, only for bonds. The buyer pays a regular premium. If the borrower defaults, the seller covers the loss.
That premium is quoted as a spread in basis points, where 100 basis points equals one percentage point a year. A higher spread means the market thinks default is more likely.
According to Morgan Stanley Research, CDS trading linked to companies including Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia averaged over $9 billion per week in September. In July, that figure sat below $2 billion.
The broader market is moving too. US corporate CDS index volumes for 2026 have already surpassed the full-year total recorded in 2025, and the year is not over.
CoreWeave in the spotlight
The most dramatic readings belong to CoreWeave, the data-center operator carrying nearly $50 billion in debt. Its five-year CDS spread exceeded 1,100 basis points in mid-October.
That level implies a default probability of around 63-64%. A year earlier, the implied figure was approximately 30%.
CoreWeave’s business model leans heavily on borrowed money to build out computing capacity for AI customers.
Even the blue chips are getting priced
The unease is not limited to younger, more leveraged firms. Oracle’s CDS was near record levels of 288-300 basis points as of mid-October.
Nvidia, Meta, Amazon and Alphabet have also seen their CDS spreads hit record highs. Nvidia and Meta are trading around 90-108 basis points.
Why the debt pile matters
The root cause is a borrowing spree with few modern parallels in tech. AI-related debt issuance has reached an estimated $466 billion so far in 2026, compared with $101 billion during the same period in 2025.
The macro backdrop is not helping. Rising inflation and expectations of higher interest rates raise questions about whether these investments can generate enough return and free cash flow to service the growing debt load.
What this means for investors and the AI trade
The pattern in the data points to a tiered market. CoreWeave sits at the high-risk end, Oracle in the middle, and the megacaps at the low end but drifting upward. That spread of outcomes suggests investors are separating companies by balance-sheet strength rather than treating AI as a single bet.
There is also a hedging story here that is less alarming than it looks. Some of the volume surge likely reflects lenders and bondholders protecting existing exposure rather than outright bets on collapse.
The key things to watch are whether spreads keep widening into year-end and whether AI revenue begins to catch up with AI spending.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.