The cost of insuring against defaults by US technology companies hit record highs on Thursday, signalling growing credit stress in the artificial intelligence (AI) investment boom. Rising US inflation and expectations of higher interest rates have intensified concerns over whether massive investments in AI infrastructure, particularly data centres, will generate sufficient profits to cover mounting debt and borrowing costs.
Credit default swap (CDS) spreads widened across several major companies, with Oracle’s five-year spreads rising to 288 basis points from 260 a week earlier, while SoftBank’s increased by 24 basis points to 424. Data-centre operator CoreWeave emerged as a major source of concern, with its CDS spreads surging beyond 1,000 basis points. The heavily indebted company owes nearly $50 billion, and its 2032 bonds traded at around 78 cents on the dollar, offering yields above 16%. CoreWeave shares also suffered sharp losses, reflecting growing investor anxiety over the sustainability of debt-funded AI expansion.
Despite strong revenue growth reported by AI developer Anthropic, market concerns persisted over the profitability of the broader AI sector. CDS spreads for Amazon, Alphabet, Meta and Nvidia also reached record highs, although their increases were more gradual than those of Oracle and CoreWeave. Analysts warn that rising financing costs and uncertain returns could challenge companies investing heavily in AI infrastructure. The developments have raised questions about whether the current AI investment boom can deliver sustainable returns or whether mounting debt could expose vulnerabilities across the technology sector.
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