Wall Street is buying more insurance against big tech companies failing to pay their debts. It is also paying a lot more for it.
In mid-October 2026, the cost of protecting against defaults by big tech and AI-linked borrowers climbed to historic levels. The driver is a simple question with an uncomfortable answer: can the AI industry earn enough to justify what it is spending?
CoreWeave leads the way, and not in a good sense
The instrument in focus is the credit default swap, or CDS. Think of it as a homeowner’s insurance policy, except the house is a company’s bonds. Buyers pay an annual premium, and if the borrower defaults, the seller covers the loss.
The premium is quoted in basis points, where one basis point is a hundredth of a percentage point. When that number climbs, the market believes a default is getting more likely.
CoreWeave, the data-center operator, is the starkest example. Its five-year CDS pushed past 1,100 basis points on October 15, 2026.
That pricing implies a five-year default risk of roughly 63-64%. A year earlier, the implied figure sat at about 30%.
The company carries nearly $50 billion in debt. It has been described as the AI trade’s canary in the coal mine.
Its bonds tell the same story. CoreWeave’s 2031 debt briefly yielded more than 16%.
Oracle, Broadcom and the half-trillion-dollar borrowing spree
Oracle is feeling the pressure too. Its CDS reached approximately 288-300 basis points as of mid-October, after widening by around 31 basis points in a single week.
The company’s reported debt load is about $160 billion. Earlier in 2026, S&P cut Oracle’s credit rating to BBB-, citing uncertainty around its AI spending.
BBB- is the lowest rung of investment grade. One more step down and Oracle’s bonds would cross into junk territory, where many institutional buyers are not allowed to follow.
Companies including Oracle, Broadcom and SpaceX have priced nearly $500 billion in new AI-related debt in 2026 alone. Broadcom is projected to need around $600 billion more in funding over the coming years.
Even the strongest names are not immune. Amazon, Alphabet and Meta have seen their CDS spreads widen to record levels, though they start from far sturdier credit positions than CoreWeave or Oracle.
Inflation adds fuel to the fire
The timing makes things worse. US inflation data came in hotter than expected, pushing interest rate expectations higher and raising the cost of carrying all that debt.
AI infrastructure demands enormous upfront capital, with revenue expected to arrive later. If borrowing costs rise while that revenue takes its time showing up, the gap between interest payments and income widens. Credit markets are pricing in exactly that risk.
Disclosure: This article was edited by Diego Almada Lopez. For more information on how we create and review content, see our Editorial Policy.