Wall Street hedges against Big Tech as CDS activity surges to record levels

Wall Street has a new favorite insurance policy, and it’s written against the companies everyone supposedly loves the most.

Credit default swaps tied to major US tech firms have exploded in volume, with exposure growing 90% since September 2025 according to data from the Depository Trust & Clearing Corporation. Weekly CDS trading volumes hit roughly $8 billion in December 2025, the highest level ever recorded.

The AI debt binge that spooked the bond market

The hyperscalers, Alphabet, Amazon, Meta, Microsoft, and Oracle, collectively issued approximately $121 billion in new debt during 2025. That capital went toward AI infrastructure and data centers, the physical backbone required to train and deploy increasingly powerful models.

Oracle emerges as the focal point

Among the five hyperscalers, Oracle has drawn the most intense scrutiny from credit traders. CDS activity on Oracle more than tripled throughout 2025, with protection costs reaching multi-year highs.

Meta has also attracted heightened CDS interest. The company’s pivot toward AI infrastructure, layered on top of its ongoing metaverse investments, has created a capital expenditure profile that would have been unthinkable even three years ago.

JPMorgan Chase launched a dedicated synthetic CDS basket covering all five AI hyperscalers: Alphabet, Amazon, Meta, Microsoft, and Oracle, letting institutional investors hedge against AI-related debt risk across the entire cohort, rather than buying protection company by company.

From equity euphoria to credit caution

The surge in CDS activity signals a psychological shift on Wall Street. The question has evolved from “how much will AI make these companies?” to “can these companies earn enough return on $121 billion in borrowed capital to justify the risk?”

The 90% increase in CDS exposure since September alone suggests this isn’t a slow drift. It’s a rapid recalibration of how institutions are thinking about concentration risk in the tech sector.

What this means for investors

Rising credit spreads increase the cost of future borrowing for these companies. If hyperscalers need to return to bond markets in 2026, the price of that capital will be higher.

The creation of dedicated hedging products like JPMorgan’s CDS basket suggests that institutional investors view AI-related debt as a distinct asset class with its own risk profile. More hedging tools mean more liquidity and better price discovery, but they also make it easier for large positions to unwind quickly if sentiment turns.

For crypto-native investors, the connection is indirect but real. A meaningful repricing of risk in Big Tech credit could tighten financial conditions more broadly, reducing the kind of risk appetite that has historically fueled flows into digital assets.

Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.