Credit default swap protection on major AI infrastructure companies has surged from $3 billion to nearly $8 billion in 2025, with most growth concentrated in the final four months—a signal that debt investors see risks equity markets may be ignoring.
Context
Financial Times data captures a divergence between credit and equity markets that historically precedes trouble. While AI stocks maintain elevated valuations, the investors who lend money to these companies are buying insurance against defaults. The spike accelerated after Oracle’s September revenue miss, coinciding with mounting concerns about data center investment returns. When lenders hedge against companies considered safe by stock investors, someone is wrong.
The Analysis
The companies being hedged read like an AI infrastructure roster: Alphabet, Amazon, Broadcom, CoreWeave, Meta, Microsoft, and Oracle. Credit investors focus on one question stock investors often overlook—will we get paid back? Their sudden demand for default protection signals concern about the fundamental sustainability of AI infrastructure spending. Oracle provides a cautionary example: its credit default swap pricing reached 2009 crisis levels before the stock declined 40%. Credit markets detected problems months before equity investors reacted.
What This Means
The $8 billion in default protection represents sophisticated investors betting against the AI investment thesis—or at least hedging their exposure. For businesses dependent on AI infrastructure providers, this creates counterparty risk worth monitoring. The divergence between credit pessimism and equity optimism cannot persist indefinitely. Historical patterns suggest lenders typically prove correct first. Companies and investors should watch credit markets for early warning signals that stock prices may not yet reflect.
Key Takeaway
When debt investors buy insurance while equity investors buy stocks, history favors the lenders. The $8 billion AI default protection surge deserves attention.
