The AI Trade's Insurance Bill Just Hit a Record: Default Swaps on Oracle, Meta and Even Nvidia at All-Time Highs

The insurance market is flashing red#

The cheapest seat in the AI trade used to be the bond market. Not anymore. The cost of insuring AI-linked debt against default — credit default swaps, or CDS — has hit record highs across the board, from the riskiest neocloud to the safest names in tech.

The latest prints, per Morgan Stanley research reported Tuesday:

Name	5-year CDS	Where it was
CoreWeave	~1,090bp	~390bp a year ago
SoftBank	424bp	+24bp in a single day last week
Oracle	322bp	144bp in January
SpaceX	226bp	110bp in June
Broadcom	136bp	Record high
Meta	108bp	Record high
Nvidia	101bp	Record high
Alphabet, Amazon, Microsoft	All-time peaks	Basket avg ~100bp, vs under 40bp a year ago

For scale: the benchmark investment-grade CDS index trades near 62bp. Insuring $10 million of CoreWeave debt now costs $1.82 million upfront plus $125,000 a quarter.

Volume tells the same story#

This isn't a few bears shouting. CDS tied to Oracle, SpaceX, Alphabet, Amazon, Meta, Broadcom and Nvidia traded more than $9 billion a week on average in September — up from under $2 billion a week in July. Total US corporate CDS index volume for 2026 has already passed all of 2025.

The driver is the debt itself: an estimated $466 billion of AI-linked issuance so far in 2026, against $101 billion in the same period last year. Hyperscaler bond supply went from $17 billion in 2024 to $109 billion in 2025 to $194 billion in the first half of 2026 alone.

The distress end: CoreWeave#

CoreWeave is where the stress concentrates. Its five-year CDS peaked intraday at 1,194.5bp last Thursday — a level implying roughly a 60% market-priced chance of default within five years, up from about 30% a year ago. Its 2031 bonds yield 15–16% and trade at 77 to 81 cents on the dollar. The company carries about $35.6 billion of debt principal (roughly $50 billion in total obligations), with $4.4 billion due by the end of this year and $6.2 billion in 2027 — while guiding to negative free cash flow until 2030.

The counter-case exists: JPMorgan argues the secured, project-level structures mean a CoreWeave default would "sting, not sink" the banks, and points to a contracted backlog above $100 billion and Nvidia's unsold-capacity backstop through 2032. Nvidia CEO Jensen Huang said publicly this week that CoreWeave's financing costs are declining and it needs no backstop.

Why it matters beyond the CDS desk#

Part of the widening is mechanical — equity managers are buying CDS as a cheaper hedge than stock puts, and that demand pushes prices up on its own. But the strategists watching it aren't dismissing it. Société Générale's Manish Kabra: "The market is increasingly focused on two things: CDS and free cash flow." Apollo's Torsten Sløk argues the market is overvaluing these companies' credit metrics. And Polus Capital's Robert Dafforn warns the sector's interlinked financing means "whatever the weakest link is" could drag down the system.

Yields confirm the repricing. Oracle's 2066 bonds yield 8.45%; Meta's long bonds about 7.5%; even Microsoft's 2060 paper yields 6.36% at 49 cents on the dollar.

This connects directly to last week's selloff, which we broke down in Record AI Profits, Worst Tech Week Since June. Our full analysis of the CDS tape — the trend lines, the hedging nuance, and what would have to break for this to go systemic — is in the companion report: The CDS Warning: What the Credit Market Is Pricing Into the AI Boom.

Financial Gurkha is an independent publication. This article is news reporting, not financial advice.