Wall Street banks trade more credit derivatives amid big tech debt surge

Big tech companies have spent the last year borrowing like there’s no tomorrow. Wall Street, ever the pragmatist, is now betting that there might be consequences.

Credit default swap trading volumes linked to major US technology firms have surged 90% since early September 2025. The spike reflects growing unease among investors and banks over the sheer scale of debt that companies like Meta, Alphabet, Oracle, and others have taken on to fund their AI ambitions.

The numbers behind the borrowing binge

Major technology firms issued over $121 billion in new debt during 2025, roughly four times the prior five-year average. Meta alone raised $30 billion. Alphabet pulled in $25 billion. Oracle completed an $18 billion bond sale.

Morgan Stanley and JPMorgan analysts project that AI-related debt issuance could reach as high as $1.5 trillion by 2028. The near-term forecast is even more aggressive, with estimates suggesting as much as $900 billion in new tech borrowing could hit the market in 2026 alone.

Why credit derivatives are suddenly interesting

Credit default swaps are essentially insurance policies on corporate debt. A buyer pays a premium. If the company defaults, the seller covers the loss. New single-name CDS contracts for issuers like Meta started trading actively in late 2025. A year earlier, many of those contracts didn’t even exist.

CDS markets have become particularly active around Oracle and Alphabet. Hedge funds have noticed the opportunity too. Saba Capital, for instance, has taken positions by selling protection on tech CDS instruments, essentially betting that these companies won’t default.

Oracle’s syndication headaches

Oracle announced a $300 billion computing agreement with OpenAI in April 2026, a deal so large it has created real challenges on the financing side. Oracle has faced syndication difficulties on large loans tied to that agreement.

What this means for investors

The sheer volume of projected borrowing creates a supply dynamic that could pressure credit spreads across the investment-grade universe. When $900 billion in new tech debt potentially hits the market in a single year, it competes with every other issuer for investor dollars.

The rapid emergence of CDS liquidity around previously unhedged names suggests that sophisticated market participants see risks that equity investors may be underpricing. The concentration risk is real. The same handful of companies driving the AI infrastructure boom are now also driving a significant portion of new corporate debt issuance.

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