AI investors rush to credit default swaps as perceived default risks rise

The credit default swap (CDS) spreads of AI-linked companies, including Oracle, SoftBank and CoreWeave, reached record highs on Thursday as investors rushed to hedge their exposure to the AI sector. A CDS is a derivative that provides protection against the risk of a debt issuer defaulting on its obligations. CDS spreads, quoted in basis points (bps), or hundredths of a percentage point, reflect the perceived risk of a credit event – the wider the spread, the higher the perceived risk. On Thursday, CDS spreads for CoreWeave, a data centre operator reportedly carrying $50 billion in debt, rose to 1,100 bps, implying an estimated 63% probability of default. Oracle’s CDS traded at 288 bps, well above those of other hyperscalers such as Meta, whose CDS traded at 105 bps. For comparison, the average CDS spread for investment-grade debt, or high-quality debt, stood at 62 bps.

Kathleen Brooks, research director at XTB, described CoreWeave as the AI trade’s “canary in the coal mine”. The rise in CDS spreads reflects investors’ concerns over whether heavily indebted AI companies can generate revenue quickly enough to service their mounting debt obligations. A macroeconomic backdrop of inflationary pressures and interest rate uncertainty is adding to these worries. Although AI stocks remain among the equity market’s top performers this year, several, including CoreWeave, have fallen sharply in recent weeks. AI company Anthropic’s disclosure of a surge in quarterly revenue did little to calm markets, and earlier this week, Broadcom chief executive Hock Tan likened the investor rush into anything AI-related to “casino gambling”.

References:

Cooper, A. (2026, October 15). Explainer: Why are credit default swaps unnerving AI investors? Reuters. https://www.reuters.com/business/finance/global-markets-cds-explainer-2026-10-15/

Westbrook, T., & Cooper, A. (2026, October 15). AI credit jitters drive US tech default insurance to record highs. Reuters. https://www.reuters.com/business/media-telecom/global-markets-cds-ai-urgent-2026-10-15/