Wall Street traders are significantly increasing their hedging against Big Tech credit exposure, with hedging activity tied to AI-era borrowing pushing outstanding credit default swap (CDS) volumes to record levels. Since the second quarter of 2025, the total value of debt being insured against default for these companies has risen by 500%. The total net notional value of outstanding credit default swaps on major tech firms has reached a record $12.5 billion, increasing by $1 billion in the second quarter of 2026 alone.
Oracle Corp. leads this trend with $6.5 billion in CDS, followed by Amazon.com Inc. and Alphabet Inc. with $2 billion each. Microsoft Corp. has $1 billion, Meta Platforms Inc. $800 million, and Nvidia Corp. $200 million. This surge in hedging is also reflected in Bank of America Corp.'s activity, where monthly notional trading volumes of Big Tech CDS have soared 900% since the beginning of 2025. Many of these CDS contracts did not see active trading until 2025.
Famous investor Michael Burry has drawn parallels between current high-yield debt levels and the 1999 tech bubble, raising concerns about the AI financing boom. Corporate borrowing linked to AI has also driven a massive 49% of investment-grade bond issuance year-to-date. Credit default swaps for Nvidia have seen a notable increase, with its five-year swap spread rising as much as 0.14 percentage point in a single day in July 2026, reaching about 0.82 percentage point. This represents the largest single-day widening since the contract began trading actively in November 2025. By late July, Nvidia's five-year CDS surged to a record 82 basis points, doubling from approximately 40 basis points in late June. By late September, Nvidia’s credit default swap spreads had climbed to 69 basis points, surpassing Alphabet’s 64 basis points, indicating that investors view Nvidia as a marginally riskier bet to pay back its debts than Google’s parent company.
This heightened credit market concern is partly attributed to Nvidia's massive financing guarantees for AI infrastructure. Nvidia is reportedly negotiating approximately $250 billion in financing guarantees for OpenAI to secure computing capacity for a data center and discussing financing for OpenAI's $350 billion chip procurement. Combined with a previously announced partnership exceeding $500 billion with SK Group, Nvidia's potential exposure to AI infrastructure deals now exceeds $750 billion. The market's concern stems from the circular nature of these transactions, where Nvidia provides financing to customers who then purchase Nvidia's chips. If AI demand falters, this model could amplify losses across the entire chain. Oracle's five-year CDS was quoted at 215 basis points in late September, significantly higher than the 144 basis points at the beginning of the year, following plans to invest $70 billion in data center construction and a credit rating downgrade to BBB by S&P Global Ratings.
