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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.

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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.

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More than US$9 billion worth of CDS linked to bonds issued by Oracle Corp., SpaceX, Alphabet Inc., Amazon.com Inc., Meta Platforms Inc., Broadcom Corp. and Nvidia Corp. was traded on average each week in September, up from less than US$2 billion in July, according to Morgan Stanley Research.

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U.S. corporate CDS index trading volumes so far this year have overtaken last year’s total, according to Bloomberg data.

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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.

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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 Microsoft Corp. that are seen as relatively safe.

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“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.”

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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 data centres and chips.

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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.

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“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.

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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.

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“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.

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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 Anthropic PBC such as Oracle and Alphabet, investors said.