Artificial intelligence has transformed from a technology story into a capital markets story. Every major hyperscaler is racing to build AI data centers, buy advanced chips, and secure enough electricity to power the next generation of computing. That race requires staggering amounts of capital, and increasingly it is being financed with debt.
Equity investors have largely applauded the spending, betting today’s investments will produce tomorrow’s profits. Bond investors, however, are beginning to demand more compensation for the added risk. That shift doesn’t suggest Big Tech is headed for trouble, but it does signal that AI’s financial costs are becoming impossible to ignore.
Credit Markets Are Sending a Different Message
Stock prices often dominate the headlines, but bond markets frequently offer a more measured view of corporate health. One of the clearest indicators is the credit default swap (CDS) market, where investors purchase insurance against the possibility that a company cannot repay its debt. It’s almost identical to paying homeowners insurance: Your house doesn’t have to burn down, but the insurance just protects you if it does.
According to market data compiled by Bloomberg, five-year CDS spreads have climbed to roughly 75 basis points for Oracle (NYSE:ORCL | ORCL Price Prediction), the highest level in at least seven years. Excluding Oracle, CDS spreads for Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), and Microsoft (NASDAQ:MSFT) have risen to approximately 49 basis points, their highest levels since 2018.
While those figures remain low by historical standards for investment-grade companies, the trend matters. Insurance costs have more than doubled since the start of 2025 and now exceed the peaks reached during the 2022 bear market.
Simply put, investors are paying more to protect themselves against credit risk, even though they still expect these companies to remain financially sound.
AI Spending Is Rewriting Corporate Balance Sheets
According to Bloomberg, Amazon, Alphabet, Nvidia (NASDAQ:NVDA), Meta Platforms (NASDAQ:META), Oracle, and SpaceX (NASDAQ:SPCX) have issued a combined $182 billion of investment-grade bonds during 2026. That’s a 1,300% increase from the prior year and represents roughly 15% of all U.S. corporate bond issuance year to date.
That borrowing is funding AI infrastructure rather than day-to-day operations. Companies are building massive data centers, purchasing networking equipment, installing power systems, and acquiring hundreds of thousands of graphics processors.
Granted, borrowing to fund growth is hardly new. The difference is scale. Oracle illustrates the point.
Compared with Microsoft or Alphabet, Oracle has committed a much larger portion of its balance sheet to AI expansion. Unsurprisingly, it now carries the highest CDS spread among the group, reflecting investors’ view that its financial leverage has risen faster than its peers.
Rising CDS Spreads Aren’t A Sell Signal
It’s tempting to interpret higher CDS spreads as a prediction of default. That would be the wrong conclusion.
A spread of 75 basis points means insuring $10 million of bonds costs about $75,000 annually. Companies in financial distress often see CDS spreads measured in hundreds — or even thousands — of basis points.
Instead, the message is more nuanced. Credit investors believe AI spending is increasing financial risk at the margin. Shareholders are focused on future earnings growth. Bondholders are focused on getting repaid. Both views can be correct.
Key Takeaway
In short, the AI boom isn’t just reshaping technology — it is reshaping credit markets as well. Record debt issuance is raising borrowing costs, nudging CDS spreads higher, and reminding investors that even the world’s largest companies face trade-offs when funding aggressive expansion.
That said, this is not a reason to abandon Big Tech. Amazon, Microsoft, Alphabet, and their peers continue to generate enormous cash flow that supports their investment plans. Rather, smart investors should recognize that the era of nearly unlimited, low-cost AI spending is giving way to one where balance sheet strength matters just as much as innovation.
Ultimately, as AI infrastructure becomes more expensive to build, the companies that can grow without overextending their finances are likely to deliver the strongest long-term returns.
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