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AI Giants Nvidia, Oracle, Alphabet See CDS Rise to Record Highs

On July 28, the financing boom driven by artificial intelligence infrastructure is facing stricter scrutiny from the bond market. Data from the London Stock Exchange Group shows that the credit default swaps (CDS) related to Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom, and Nvidia have recently risen to record highs, indicating that investors are beginning to demand higher risk compensation. Credit default swaps, or CDS, are akin to purchasing insurance for corporate debt. A higher spread typically means that the market perceives greater risk in holding the related bonds. Oracle is under the most pressure, with its five-year CDS rising to 215 basis points on Monday, significantly up from 144 basis points at the beginning of the year. At this quote, the cost of providing one year of protection for $10 million of Oracle debt is approximately $215,000. Nvidia's five-year CDS peaked at around 82 basis points on Monday, marking the largest intraday increase since the related contracts began active trading last November. According to ICE Data Services, this means that purchasing five-year default protection for $10 million of Nvidia debt would require an annual payment of about $82,000. Alphabet's five-year CDS reached a historical high of 67 basis points on Monday. However, Alphabet's CDS will not start trading until November 2025, so the historical comparison for this 'record high' is relatively short. The credit market's concern is not about a sudden drop in AI demand, but rather a mismatch between investment scale, return cycles, and financing speed. Standard & Poor's estimates that capital expenditures for Alphabet, Amazon, Meta, Microsoft, and Oracle could total $737 billion by 2026, significantly higher than $261 billion in 2024.

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