The cost of insuring against defaults by US technology companies has climbed to record levels, signalling growing investor concern over the debt financing behind the artificial intelligence boom. Data-centre operators and companies relying on future AI revenue are facing particular scrutiny as borrowing costs rise and questions emerge over the returns on massive infrastructure investments.
Higher-than-expected US inflation has strengthened expectations that interest rates could remain elevated, adding pressure to heavily indebted businesses. Investors are increasingly questioning whether companies can generate enough revenue from AI investments to cover their financing costs.
Five-year credit default swap (CDS) spreads for Oracle stood at 288 basis points on Thursday, according to S&P Global Market Intelligence. Although unchanged from the previous session, the figure was up from 260 basis points a week earlier. SoftBank’s five-year CDS spreads widened by 24 basis points to 424 basis points.
Credit concerns are particularly acute at CoreWeave, a data-centre operator that has accumulated nearly $50 billion in debt, according to LSEG data. Its CDS spreads have surged beyond 1,000 basis points, reflecting a sharp increase in the perceived risk of default.
The company’s bonds have also come under pressure. Its debt maturing in 2032 was trading at around 78 cents on the dollar on Tradeweb, offering a yield slightly above 16%.
Kathleen Brooks, research director at XTB, described CoreWeave as a potential warning sign for the wider AI investment market. She said the steep decline in its bond prices could indicate that investors are becoming less confident in a growth story increasingly supported by borrowing.
Strong revenue growth at AI developer Anthropic has done little to ease broader market concerns. An investor who attended a pre-IPO meeting with the company’s leadership in San Francisco said quarterly revenue rose 45% to $16.8 billion in the third quarter. Anthropic is reportedly targeting a valuation of $2 trillion.
The contrast highlights a central concern for investors: even as AI businesses expand rapidly, the cost and sustainability of financing their growth are becoming increasingly important questions.
