AI's Next Big Question: Will Future Cash Flows Justify Today's Investment Boom?

According to the Financial Times reporting,

"More than $9bn worth of CDS linked to bonds issued by Oracle, SpaceX, Alpha­bet, Amazon, Meta, Broad­com and Nvidia was traded on average each week in September, up from less than $2bn in July, accord­ing to Morgan Stanley Research. US cor­por­ate CDS index trading volumes this year have overtaken last year’s total, according to Bloomberg.

AI-linked debt issuance has rocketed with companies raising an estimated $466bn so far this year, up from $101bn in the same period in 2025, according to Morgan Stanley, to fund infrastructure such as data centres and chips.

Five-year Meta CDS has this month climbed to 108 basis points, meaning it costs $108,000 a year to insure $10mn of debt against default, while derivatives tied to Nvidia have climbed to 101bp. Protection against Alphabet and Amazon default is also at record highs.

Oracle’s CDS is now 322bp, up from 144bp at the start of the year. The five-year CDS tied to CoreWeave debt is trading at about 1,090bp, with demand so high that a buyer of $10mn of pro­tection would need to pay $1.82mn upfront."

My Take:

This is an interesting piece of information because it suggests that the broader market is becoming more aware of potential credit risks associated with the massive AI investment cycle. While increased CDS activity does not necessarily imply that defaults are imminent, it is an important data point because many financial crises have historically begun with credit events that later cascaded through the broader financial system.

Make no mistake, AI is here to stay. That is not the question. The FT article signals to me that investors are beginning to ask a question that has surfaced during many investment booms: Will the future cash flows generated by these enormous investments ultimately justify the amount of debt and capital being committed today?