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Breadcrumb Trail Links (/) Home  (/category/financial-times/) Financial Times    (mailto:?Subject=I%20saw%20this%20on%20Financial%20Post&Body=https%3A//financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading) (Share via email)   (https://www.reddit.com/submit?kind=link&url=https%3A//financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading&title=) (Share on Reddit in new tab) (Reddit)   (https://twitter.com/intent/tweet?url=https%3A//financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading&text=Financial%20Post&via=) (Share on X in new tab) (X)   (https://www.linkedin.com/sharing/share-offsite/?url=https%3A//financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading) (Share on LinkedIn) (Share on Linkedin)   (Open more share options)   (Close)  Share this Story : Financial Post  (https://financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading)               Copy Link   (mailto:?Subject=I%20saw%20this%20on%20Financial%20Post&Body=https%3A//financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading) (Share via email) Email   (https://twitter.com/intent/tweet?url=https%3A//financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading&text=Financial%20Post&via=) (Share on X in new tab) X   (https://www.reddit.com/submit?kind=link&url=https%3A//financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading&title=Financial%20Post) (Share on Reddit in new tab) Reddit   (https://pinterest.com/pin/create/button/?url=https://financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading&media=https://smartcdn.gprod.postmedia.digital/financialpost/wp-content/uploads/2026/10/1021-bc-debt-.jpg) (Share on Pinterest in new tab) Pinterest   (https://www.linkedin.com/sharing/share-offsite/?url=https://financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading) (Share on LinkedIn in new tab) LinkedIn   (https://www.tumblr.com/widgets/share/tool?canonicalUrl=https://financialpost.com/financial-times/ai-debt-worries-spark-surge-in-default-insurance-trading&title=Financial%20Post) (Share on Tumblr in new tab) Tumblr        AI debt worries spark surge in default insurance trading Volumes of credit default swaps linked to big tech groups soar as investors seek protection against boom unravelling Author of the article: (Financial Times) Financial Times Ramsay Hodgson   Published Oct 20, 2026 4 minute read    Join the conversation          (A trader works on the floor of the New York Stock Exchange (NYSE) at the opening bell in New York City on October 19, 2026.)  A trader works on the floor of the New York Stock Exchange (NYSE) at the opening bell in New York City on October 19, 2026.  Photo by ANGELA WEISS / AFP via Getty Images      Article content Investors are racing to buy credit default swaps to protect their portfolios in the event the AI boom unravels, sending trading volumes surging for an instrument that shot to prominence during the global financial crisis.   (Financial Post) THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others. Daily content from Financial Times, the world's leading global business publication. Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account. National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles, including the New York Times Crossword.   SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada. Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others. Daily content from Financial Times, the world's leading global business publication. Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account. National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles, including the New York Times Crossword.   REGISTER / SIGN IN TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account. Share your thoughts and join the conversation in the comments. Enjoy additional articles per month. Get email updates from your favourite authors.   THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK. Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors      Sign In or Create an Account Email Address (youremail@emailaddress.com)  Continue     or         (/subscribe) View more offers  Already a subscriber? (/sign-in/) Login   If you are a Home delivery print subscriber, online access is included in your subscription. (/activate/) Activate your Online Access Now      Article content The wave of borrowing to finance trillions of dollars of AI infrastructure spending is fuelling demand for these insurance-like derivatives, which pay out if the company they are tied to defaults on its debt.   Article content (Loading...)  We apologize, but this video has failed to load. Try refreshing your browser, or(Video Centre) (/video-centre/) tap here to see other videos from our team .   AI debt worries spark surge in default insurance trading Back to video          (Close sticky video)    (Loading...)  We apologize, but this video has failed to load. Try refreshing your browser, or(Video Centre) (/video-centre/) tap here to see other videos from our team .   Play Video       Article content    Advertisement 1  Story continues below   This advertisement has not loaded yet, but your article continues below.        Article content More than US$9 billion worth of CDS linked to bonds issued by (https://financialpost.com/tag/oracle-corp/) Oracle Corp. , (https://financialpost.com/tag/spacex/) SpaceX , Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Broadcom Corp. and (https://financialpost.com/tag/nvidia-corp/) Nvidia Corp. was traded on average each week in September, up from less than US$2 billion in July, according to Morgan Stanley Research.   Article content (Top Stories)  Top Stories Get the latest headlines, breaking news and columns.   (mvQt03tYb8jsktsNPsh1HD2nfnStQ99gwV6A3yM35qjSOLLEM5YAykxJkQFORFe2) (youremail@email.com) There was an error, please provide a valid email address.    Sign Up  By signing up you consent to receive the above newsletter from Postmedia Network Inc.  Thanks for signing up! A welcome email is on its way. If you don't see it, please check your junk folder. The next issue of Top Stories will soon be in your inbox.  We encountered an issue signing you up. Please try again  Interested in more newsletters? (/newsletters) Browse here.        Article content U.S. corporate CDS index trading volumes so far this year have overtaken last year’s total, according to Bloomberg data.   Article content In a sign of investors’ increasing unease over the borrowing binge, the cost of buying CDS on many AI-linked companies has hit record highs this month.   Article content This so-called spread has in recent days climbed not only for companies that investors judge as riskier, such as AI cloud-computing provider CoreWeave, but also for those such as (https://financialpost.com/tag/microsoft-corp/) Microsoft Corp. that are seen as relatively safe.   Article content “CDS has become a key bellwether of investor sentiment towards hyperscaler funding and the broader AI trade,” said Manish Kabra, head of U.S. equity strategy at Société Générale. “The market is increasingly focused on two things: CDS and free cash flow.”   Article content AI-linked debt issuance has rocketed this year, with companies raising an estimated US$466 billion so far in 2026, up from US$101 billion in the same period in 2025, according to Morgan Stanley, to fund infrastructure such as (https://financialpost.com/tag/data-centres/) data centres and chips.   Article content Advertisement 2  Story continues below   This advertisement has not loaded yet, but your article continues below.        Article content While the volume of borrowing has slowed from its June peak, investors say the number of big borrowers exposed to AI risk and concerns over companies’ ability to make money from their AI investments are helping drive demand for CDS.   Article content Read More (https://financialpost.com/personal-finance/no-debt-crisis-canadians-red-new-report) (Canada’s household debt service ratio (DSR), an indicator of households’ ability to pay off their debts, has dropped from its 2023 peak, according to C.D. Howe.)  There’s no debt crisis, but here are the Canadians who are in the red, according to a new report    (https://financialpost.com/personal-finance/garry-marr-buy-a-house-in-a-trade-war) (While some markets may be tightening, there is no question that trade wars might rekindle fears about what is one of the biggest financial decisions for new buyers.)  Garry Marr: Should you buy a house in the middle of a trade war?       Advertisement 1  Story continues below   This advertisement has not loaded yet, but your article continues below.             Article content “Clearly when you’re in a market where the risk is very concentrated, what you want to buy is CDS,” said Jim Caron, chief investment officer of the portfolio solutions group at Morgan Stanley Investment Management, adding that these swaps were also a “cheap hedge” for investors.    Article content Traditionally the reserve of pure credit investors, multi-asset and equity managers are increasingly using these swaps as a cost-effective way to hedge their AI exposure, helping to push prices to record highs.   Article content “One part [of demand] is a true bond investor who is looking to hedge their book. Another part is multi-asset and equity speculators who are trying to find a cheap hedge to their technology exposure,” said Morgan Stanley’s Caron.   Article content The interdependent nature of the AI sector’s finances has added to fears of a bubble. That had prompted investors to trade CDS on companies that supply computing infrastructure to OpenAI and (https://financialpost.com/tag/anthropic-pbc/) Anthropic PBC such as Oracle and Alphabet, investors said.       Advertisement 1     This advertisement has not loaded yet.        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(/news/trump-tariffs-more-damage-economy-than-recession) (Posthaste: Trump's tariffs can inflict far worse damage on the economy than just a recession, warns economist) Posthaste: Trump's tariffs can inflict far worse damage on the economy than just a recession, warns economist    (/news/trump-tariffs-more-damage-economy-than-recession) (Closed factory)    (/category/news/) News     (/opinion/joe-oliver-two-questions-mark-carney-needs-to-answer) (Joe Oliver: Two questions Mark Carney needs to answer) Joe Oliver: Two questions Mark Carney needs to answer    (/opinion/joe-oliver-two-questions-mark-carney-needs-to-answer) (Canada's Prime Minister Mark Carney (C) speaks during a news conference, alongside President of the King's Privy Council for Canada Dominic LeBlanc (L) and Minister of Transport and Internal Trade Chrystia Freeland (R), during a news conference on Parliament Hill in Ottawa on June 6, 2025.)    (/category/opinion/) FP Comment     (/telecom/norway-data-center-partner-canada-europe-fiber-link) (Norway data centre firm hunts for partner on Canada-Europe fibre link) Norway data centre firm hunts for partner on Canada-Europe fibre link    (/telecom/norway-data-center-partner-canada-europe-fiber-link) (An optical fibre cable of the Swedish digital infrastructure provider GlobalConnect is being laid underground in Espoo, Finland on Oct. 16, 2024.)    (/category/telecom/) Telecom            Advertisement 2  Advertisement   This advertisement has not loaded yet, but your article continues below.       Article content “There is a complexity premium being priced into these tech names,” said Gavan Nolan, an executive director at S&P Global Market Intelligence, referring to the sector’s complex and interlinked financing. He added that large intraday swings in CDS spreads were a sign of “the uncertainty that is out there.”   Article content Five-year Meta CDS has this month climbed to 108 basis points, meaning it costs US$108,000 a year to insure US$10 million of debt against default, while derivatives tied to Nvidia have climbed to 101 basis points, both of which are record highs.   Article content The price of protection against default at Alphabet and Amazon is also at all-time peaks.   Article content But while the price of some tech giants’ CDS is on the rise, it is still relatively low compared with spreads on the AI companies investors deem riskier, for instance because of high debt levels.   Article content Oracle’s CDS was quoted at 322 basis points on Monday, up from 144 basis points at the start of the year. CDS on (https://financialpost.com/tag/elon-musk/) Elon Musk ‘s SpaceX traded at a record 226 basis points at the start of the week, up from 110 basis points when it first began trading in late June.   Article content Advertisement 3  Story continues below   This advertisement has not loaded yet, but your article continues below.        Article content Many investors see the derivatives as a relatively cheap and straightforward way of protecting themselves against a blow-up.   Article content “Either you buy CDS or you buy equity put options, and sometimes these stocks can be extremely volatile. Hedging something that is much more volatile is extremely difficult in the equity space. It’s extremely expensive,” Kabra at Société Générale added.   Article content Robert Dafforn, chief investment officer of London-based distressed debt specialist Polus Capital, pointed to “very highly levered” borrowing in the sector. “You know there is going to be a lot of misallocation” of capital.   Article content Dafforn added that the level of circularity within the financial system driving AI’s advancement meant that “whatever the weakest link is will actually start to deteriorate the system.”   Article content By far the most concern in the market centres on neocloud CoreWeave, some of whose bonds have sold down into distressed territory. The five-year CDS tied to the company’s debt is trading at about 1,090 basis points, with demand so high that a purchaser of US$10 million of protection would need to pay US$1.82 million upfront, with additional quarterly payments of US$125,000.   Article content “Once a name trades over 1,000 basis points…the pricing of the expected recovery [of bondholders’ principal] starts to take over,” Nolan at S&P Global added.   Article content Additional reporting by Ian Smith in London    Article content © 2026 The Financial Times Ltd    Article content     Advertisement 2     This advertisement has not loaded yet.                     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