AI Giants' Default Protection Costs Rise, Financing Uncertainty Intensifies

TechFlow news, July 28. According to Jin10 Data, the five-year CDS chart shows that the cost of default protection for Meta and Broadcom has risen to approximately 90 basis points, while Nvidia, Amazon, and Alphabet have also risen to approximately 65–70 basis points, all reaching recent record highs. Calculated at 90 basis points, purchasing one year of protection for $10 million in debt costs approximately $90,000. Oracle faces more prominent pressure, with its five-year CDS rising from 144 basis points at the start of the year to 215 basis points.

This does not mean the bond market judges that tech giants are about to default, but rather that it is beginning to increase risk compensation for AI financing uncertainty. Capital expenditures for high-compute companies are expected to reach approximately $875 billion this year. Alphabet and Oracle's recent free cash flow has turned negative, and some companies are continuing to expand data centers through bond issuance, leasing, and financing guarantees.

The bond market's concern is that the pace of investment continues to scale up, while AI revenue, profits, and cash recovery speeds remain difficult to predict. However, CDS trading for individual companies may be relatively thin, and small trades can also amplify price movements. Therefore, the current situation more closely resembles a widening discount on credit confidence and cannot yet be directly defined as a default crisis.