Credit derivatives trading on specific tech companies continues to rise, amid concerns that they may be borrowing too much to fuel AI development
Debt investors are worried that the biggest tech companies will keep borrowing until it hurts in the battle to develop the most powerful artificial intelligence.
Context & Ripple Effects
AI infrastructure borrowing had already expanded sharply: related coverage put 2025 borrowing by infrastructure companies above $100 billion, while smaller borrowers faced higher rates amid doubts about unproven AI businesses. That widening financing divide makes credit-market hedging around large tech issuers more consequential.
This follows a December report that CDS activity tied to a small group of US tech companies had climbed 90% since early September. The current rise suggests investor concern is persisting as AI capital expenditure is increasingly financed with debt.
First-order effects
- Debt investors and derivatives desks gain a more active market for hedging or expressing concern about individual tech borrowers' AI-related leverage.
- The companies whose debt is referenced face closer credit-market scrutiny, even where higher trading volume alone does not establish a change in their underlying credit quality.
Second-order effects
- If heavier derivatives activity is accompanied by wider credit protection costs, new bond financing could become more expensive or more selectively available for AI investment.
- Smaller AI infrastructure borrowers may face a tougher comparison point: prior coverage already showed higher rates for them, while large tech issuers attract the deepest hedging liquidity.
Third-order effects
- AI investment is becoming more tightly linked to credit-market risk transfer, not just equity-market expectations, potentially making debt capacity a greater determinant of who can sustain infrastructure spending.
- If this pattern persists, lenders and investors may distinguish more sharply between AI spending backed by durable cash flows and spending reliant on continued inexpensive borrowing.
The trend: The story is part of the financialization of AI infrastructure, as debt and derivatives markets increasingly shape the pace and distribution of AI capital expenditure.