Why is trading in AI-related credit derivatives increasing?
Investors are purchasing more credit default swaps linked to major technology companies as borrowing to finance artificial intelligence infrastructure expands.
According to Morgan Stanley Research, CDS trading associated with bonds issued by Oracle (NYSE:ORCL), SpaceX (NASDAQ:SPCX), Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Meta (NASDAQ:META), Broadcom (NASDAQ:AVGO) and Nvidia (NASDAQ:NVDA) averaged more than $9 billion per week in September.
The figure represents a substantial increase from less than $2 billion in July.
Bloomberg data also indicate that trading in US corporate CDS indices has already surpassed the volume recorded for the whole of 2025.
The increase reflects demand from investors seeking protection against changes in corporate credit risk as technology companies expand their borrowing.
How has AI-related debt issuance changed?
Morgan Stanley estimates that AI-linked companies have issued approximately $466 billion of debt so far in 2026.
That compares with $101 billion during the corresponding period last year.
The borrowing is being used to finance data centres, semiconductors and other infrastructure required for artificial intelligence services.
The scale of investment has prompted closer examination of how quickly companies can generate revenue and cash flow from their infrastructure spending.
Investors are also considering the financial connections between AI developers, cloud computing providers and the companies supplying the necessary hardware.
Which companies have seen the largest increases in credit protection costs?
Several major technology companies have experienced record CDS spreads.
Meta’s five-year CDS reached 108 basis points this month, while Nvidia’s rose to 101 basis points.
Oracle’s spread increased to 322 basis points on Monday from 144 basis points at the start of 2026.
SpaceX’s CDS reached 226 basis points, compared with 110 basis points when trading began in late June.
Alphabet and Amazon also recorded all-time highs in their credit protection costs, while Microsoft (NASDAQ:MSFT) and CoreWeave (NASDAQ:CRWV) experienced increases.
A higher CDS spread means that investors must pay more to obtain protection against a specified credit event, although the price can also reflect market liquidity and demand for hedging.
Why are portfolio managers using CDS instead of selling their investments?
Credit default swaps allow investors to obtain protection against credit events without necessarily selling their existing securities.
Multi-asset and equity managers are using these instruments to manage risks associated with their exposure to AI-related businesses.
The approach has become more relevant because companies across the AI sector are linked through infrastructure contracts, financing commitments and commercial relationships.
“CDS has become a key bellwether of investor sentiment towards hyperscaler funding and the broader AI trade,” said Société Générale’s Manish Kabra.
The increased activity indicates that investors are monitoring corporate credit markets alongside equity valuations when assessing the sector.
What makes CoreWeave’s CDS pricing different?
CoreWeave’s five-year CDS spread reached approximately 1,090 basis points, substantially higher than the spreads reported for many larger technology companies.
At the quoted price, purchasing $10 million of protection would require an upfront payment of around $1.82 million, followed by quarterly payments of $125,000.
The pricing reflects the terms of the CDS contract and the market’s assessment of the risks associated with CoreWeave’s debt.
Robert Dafforn, chief investment officer at Polus Capital, pointed to the high levels of leverage used in parts of the AI infrastructure sector.
He also expressed concern that some capital expenditure may not produce sufficient returns.
What could influence CDS markets in the coming months?
Future demand for AI-related credit protection will depend partly on borrowing requirements, financing costs and the financial performance of companies developing AI infrastructure.
The expansion in debt issuance has increased the importance of assessing whether expected revenue can support investment and repayment obligations.
CDS spreads provide one market-based measure of changing credit conditions, but they do not independently establish whether a company will default.
The recent rise in trading volumes and protection costs indicates that investors are increasingly using credit derivatives to manage risks associated with the financing of artificial intelligence infrastructure.
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