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Credit markets are flashing WARNING SIGNS across the AI trade: Oracle, $ORCL, 5-year credit default swap (CDS) spread has surged to ~263 basis points, while SpaceX's has risen to ~203 basis points, both at record highs. At the same time, CoreWeave's $CRWV, 5-year CDS is up to a record 982 basis points. This comes as tech companies have issued nearly $500 billion in new debt this year to finance AI infrastructure, with 9 US investment-grade bond deals worth at least $25 billion each. The growing debt burden is colliding with uncertainty over whether AI revenues will justify the enormous spending. As a result, investors are increasingly demanding higher compensation to take on credit risk. Oracle's market-implied 5-year default risk has risen above 20%, compared with around 16% for SpaceX and more than 7% for Nvidia. The pressure could intensify further, with Goldman Sachs projecting hyperscaler debt issuance to jump from $250 billion in 2026 to a massive $420 billion in 2027, as 35% of next year's capital spending is expected to be debt-funded. The AI boom is now testing credit markets, as investors begin repricing the risks behind Big Tech's unprecedented borrowing spree.

Credit risk of AI companies is SKYROCKETING: Oracle's 5-year credit default swap (CDS) spread has surged to a record 261 basis points, while Broadcom, $AVGO, has reached a record 136 basis points. As a result, 5-year CDS pricing implies a default probability of 20.4% for Oracle, $ORCL, 16.5% for SpaceX, $SPCX, over 7% for Nvidia, $NVDA, and roughly 11% for Broadcom, $AVGO. This comes as Big Tech's AI infrastructure boom has turned into a debt frenzy, with nearly $500 billion in AI-related debt issued this year across the $10 trillion US corporate debt market. The borrowing spree is accelerating, with a record 9 US high-grade debt deals worth at least $25 billion each, largely driven by technology companies, while Broadcom alone could raise up to $600 billion in the coming years. Meanwhile, CCC-rated corporate credit spreads have widened to 1,014 basis points, their highest level in 3 years. The pressure reflects rising interest rates, uncertainty over future AI revenues, and concerns about circular financing, as companies take on more debt to fund an AI investment cycle whose eventual returns remain uncertain. AI borrowing is exploding, but credit markets are increasingly questioning whether future revenues will be enough to justify the debt surge.